How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lane Your Own Question
Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 9478
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
1929974
Type Your Finance Question Here...
Lane is online now
A new question is answered every 9 seconds

I refinance my home. I paid $5580 for a 2.5 interest rate.

This answer was rated:

I refinance my home. I paid $5580 for a 2.5 interest rate. $2,636 for getting loan. total $8.216 adjusted origination fees. How much can I deduct?

Lane :

Hi, you'll need to look at your closing statement for this ...

Lane :

Find which fees on your HUD-1 settlement statement are points. Not all of your closing costs are points. Locate the origination points and the discount points. The IRS does not classify any settlement fees other than these as points.

Lane :

The settlement statement must clearly show the points as a percentage of your loan amount.

Lane :

You cannot change the other closing costs such as title insurance and appraisals into points just to write them off.

Lane :

And finally... You must have paid the points out of your own funds at the time of closing; the loan cannot include financing the points into the loan.

Lane :

If the total you mention is all encompassed as EITHER origination points OR discount points, you can deduct it all

Lane :

Make sense?

Lane :

The way you worded you question? ... it sounds very much like you may e able to deduct it all ("I paid $5580 for a 2.5 interest rate." = discount points) and ("$2,636 for getting loan" = origination points)

Lane :

Other things? .... (1) You have to itemize (these are schedule A deductions) (2) The logic for this as a deduction is that IRS considers these points as "pre-paid interest," and (3) you must have actually paid (not rolled into the loan amount)

Lane :

I still don't see you coming into the chat session, so I'll move us to the "Q&A" mode. … Maybe that will help … (We can still continue a dialogue there, just not in real-time chat, as we can here)


Please let me know if you have any questions at all ...


Lane


Lane :

It's been about 10 minutes here, so I'm guessig we're having system problems - system HAS been down some today ... by moving us to Q&A we can be sure to continue, in case you have follow-up questions

Lane :

Let me know …


Lane


Hi Jearline,

... just checking back in HERE, (since I never saw you come into the chat).

Please let me know if you have any follow-up questions at all.

Lane

So sorry, Jearline...

I just saw my email notification come up for this question.

... noticed that you said RE-finance

I was focusing on whether your costs could be characterized as points and trying to point you to the settlement statement to make this determination.

The second part of the test for deductibility is whether the loan is used to purchase or build a primary residence.

Typically you must deduct the points on a refinance mortgage over the life of the loan, unless part of the refinance proceeds are used to improve the main home.

Sorry for any confusion this may have caused.

Hopefully having all the facts will help you "see around some corners" here.

Here's an excellent article on the subject:
http://homeguides.sfgate.com/can-deduct-loan-origination-fees-taxes-2698.html

Let me know if you have questions,

Lane
Lane and other Finance Specialists are ready to help you

Thanks for the rating!

... wanted to get that to you.

and remember, if the proceeds WERE used to add value or additions to the home, then you may be able to deduct.

Thanks again,

Lane