You generally cannot deduct the full amount of points in the year paid. Because they are prepaid interest, you generally must deduct them over the life (term) of the mortgage.
Per IRS Publication 17 Your Federal Income Tax (For Individuals), page 156:
Points
The term "points" is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points.
A borrower is treated as paying any points that a home seller pays for the borrower’s mortgage.
General Rule
You generally cannot deduct the full amount of points in the year paid. Because they are prepaid interest, you generally must deduct them over the life (term) of the mortgage.
Deduction Allowed in Year Paid
You can fully deduct points in the year paid if you meet all the following tests.
If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan.
Home improvement loan.
You can also fully deduct in the year points paid on a loan to improve your main home, if tests (1) through (6) above are met.
Amounts charged for services.
Amounts charged by the lender for specific services connected to the loan are not interest. Examples of these charges are:
You cannot deduct these amounts as points either in the year paid or over the life of the mortgage.
Points paid by the seller.
The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer.
For information about the tax treatment of these amounts and other settlement fees and closing costs, see IRS Publication 530 Tax Information for First-Time Homeowners.
To enter mortgage interest information, including points: