Mortgage interest is deductible up to $1 million as a married couple, $500,000 if Married Filing Separately as long as you use the money to buy, build or improve on your home, and the loan is secured by your home.

The interest you pay on loans secured by your home and used for a purpose other than to buy, build or improve your home is deductible for loans up to $100,000, ($50,000 each if you're Married Filing Separately). The limit may be reduced depending on the market value of the home at the time you take out the loan.
 

Points or origination fees paid when you purchase your home generally are completely deductible in the year you pay them. Alternatively, you may choose to amortize the points over the term of your mortgage. This choice is usually made only when your itemized deductions are less than the standard deduction for the year you bought the home.

Buying a Home -- What’s Deductible?
 

A homeowner can deduct points used to obtain a mortgage when buying a home, mortgage interest paid during the year, and property taxes.

What are Points?
Mortgages have costs and one of those costs is the "loan origination fee." The loan origination fee is usually a percentage of the loan amount, generally expressed as "points." One "point" on a $150,000 loan would be $1500. One and a half points on the same loan amount would be $2250.

On VA and FHA loans, points are often broken down into two categories: loan origination fee, and discount points. Both are deductible. The loan origination fee must be expressed as points in order for it to be tax deductible.

Your lender cannot inflate the points to include other items you would normally be charged. When buying a home, there are normally other charges such as appraisal fee, title insurance fee, property taxes, settlement fees, and so on.

If the seller pays the buyer’s points, the Internal Revenue Service allows the buyer to deduct this as an expense on their federal tax returns. However, the seller cannot deduct them, too.

Points paid to refinance a loan must be deducted over the term of the loan.

If you deduct points over the term of the loan and sell the home or refinance it again before the loan expires, you can deduct in the year of the sale or refinancing any points that you didn't previously deduct.

also see:
Personal Residence Capital Gain Exclusion

Other Deductible Closing Costs
With two exceptions, other closing costs are not deductible. Those exceptions are pre-paid interest and pro-rated property taxes.

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