Keyword: Loan Origination Fee
This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
3.6 Itemized Deductions/Standard Deductions: 6. Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses)
I just bought a home. What can I deduct from the settlement statement?
If you bought your home, you probably paid settlement or closing costs
in addition to the contract price. These costs are divided between you and
the seller according to the sales contract, local custom, or understanding
of the parties. If you built your home, you probably paid these costs when
you bought the land or settled on your mortgage.
The only settlement or closing costs you can deduct are home mortgage interest,
points that represent interest and certain real estate taxes. You may, deduct
them in the year you buy your home if you itemize your deductions. Real estate
taxes are usually divided so that you and the seller each pay taxes for the
part of the property tax year that each owned the home.
You add certain other settlement or closing costs to the basis of your
home. You include in your basis the settlement fees and closing costs that
are for buying your home. A fee is for buying the home if you would have had
to pay it even if you paid cash for the home
There are some settlement or closing costs that you cannot deduct or add
to the basis of your home. These include fees and costs that are for getting
a mortgage loan. For more information refer to Publication 530, Tax
Information for First Time-Homeowners, and Publication 936, Home
Mortgage Interest Deduction.
I refinanced my home last year and paid points. Are they all deductible
Generally points paid to refinance your home are not deductible in their
entirety in the year paid. They are "amortized" or deducted over the life
of the loan. For more information, refer to Publication 936 , Home
Mortgage Interest Deduction, and Tax Topic 504, Home Mortgage
I refinanced my home and paid closing costs. Are the loan origination
fee, appraisal fee, document prep fee, closing fee, and title insurance or
any of the other expenses deductible? Are any of the fees I paid to the bank
for the loan deductible?
Deductible fees are limited to home mortgage interest and certain real
estate taxes. Points that represent interest on a refinancing are amortized
over the life of the loan.
Fees that are not associated with the acquisition of a loan may only have
effect on the basis of the home. An example would be a transfer tax that would
be charged regardless of whether a loan was involved.
Fees related to the acquisition of a loan are not deductible and are not
basis adjustments. A credit report fee is a good example.
For more information, refer to Publication 936, Home Mortgage
Interest Deduction ; Tax Topic 504, Home Mortgage Points;
and Publication 551, Basis of Assets .
I refinanced my home mortgage and had to pay $2,000.00 worth of
points to get the mortgage. Can I claim these points as a deduction on my
Points that represent interest paid for a refinanced mortgage have to be
amortized over the life of the loan. Points charged for specific services,
such as preparation costs for a mortgage note, appraisal fees, or notary fees
are not interest and cannot be deducted. It is possible to deduct a larger
percentage of the points in the first year if a portion of the mortgage proceeds
is used to improve the home and sufficient cash is added to the transaction
to be equal to or greater than the amount of the points. Certain other restrictions
apply. For more information, refer to Publication 936, Home Mortgage
Interest Deduction; and Tax Topic 504, Home Mortgage Points.
If I must deduct points over the life of my mortgage, and I have
a 30 year mortgage, does this mean that I divide the points paid by 30 and
enter that amount on Schedule A?
You need to divide the points by the number of payments over the term of
the loan and deduct points for a year according to the number of payments
made in the year. If the loan ends prematurely, due to payoff or refinance,
for example, then the remaining points are deducted in that year. Points not
included in Form 1098 (PDF) (usually
not included on a refinance) should be entered on line 12 of Form 1040, Schedule A (PDF), Itemized Deductions. For more information,
refer to Publication 936, Home Mortgage Interest Deduction; and Tax Topic 504, Home Mortgage Points.
I refinanced my home once and paid $1,230 in points. On Schedule
A, line 12 (points not reported on Form 1098) I have listed $41 each year.
I refinanced my home again and paid off the entire previous loan. Am I entitled
to include the $984 (remaining points paid off) on Schedule A this year?11.2 Sale or Trade of Business, Depreciation, Rentals: Rental Expenses v Passive Activity Losses (PALs)
If you spread your deduction of the points over the life of the mortgage,
you can deduct any remaining balance of the points in the year the mortgage
ends. A mortgage may end early due to a prepayment, refinancing, foreclosure,
or similar event.
Under the conditions described in the question, the $984 would be deductible
in the year the mortgage ended. You would report the deduction on Form 1040, Schedule A (PDF), Itemized Deductions.
For more information, refer to Publication 936, Home Mortgage Interest
Deduction; and Tax Topic 504, Home Mortgage Points.
Where on Schedule E do you put costs paid (points, fees, etc.) to
refinance a rental property?
Expenses you pay to obtain a mortgage on your rental property cannot be
deducted as interest. These expenses, which include mortgage commissions,
abstract fees, and recording fees, are capital expenses. You may amortize
them over the life of the mortgage on line 18 of Form 1040, Schedule E (PDF), Supplemental Income and Loss.
Tax Topics & FAQs | 2003 Tax Year Archives | Tax Help Archives | Home