In which year or years are points (representing prepaid interest on a loan) deductible? A. Prepaid interest paid in the form of points must be capitalized and amortized over the life of the loan, no exceptions. B. Points representing prepaid interest on a loan are deductible in the year that they are paid, no exceptions. C. Points representing prepaid interest on a loan are deductible in the year that they are paid if the loan is obtained to purchase or improve the taxpayer's principal residence. If not, the points must be capitalized and amortized over the period to which the interest relates. D. Points representing prepaid interest on a loan are deductible in the year that they are paid if the loan is obtained to purchase or improve business real estate. If not, the points must be capitalized and amortized over the period to which the interest relates