Question:

Are mortgage loan origination fees tax deductible?

Answer:

Yes, mortgage loan origination fees are tax deductible in most cases. There are some rules, though, in applying tax deduction. To itemize deductions, it is recommended you use the services of a certified accountant.

How are loan origination fees deducted?

Loan origination and discount points are both tax-deductible, as well as interest and property taxes. If loan origination points were high but you didn't pay other closing costs (e.g. escrow account setup fee, home appraisal and attorney fees, etc.), the loan origination fee is not tax deductible. To be tax deductible, it has to be clearly stated in points on top of the GFE and cannot pay for other items.

If you obtained a mortgage to buy your primary residence, your loan origination points are tax-deductible for the year the purchase was made and only if the cash you contributed to the loan is greater than what you paid in origination points. Points paid for getting a second home are tax deductible over the years of the loan, same as points paid to refinance.

Seller-paid points are tax-deductible to the buyer even though one could easily assume the opposite.

If yours and/or your spouse's income falls into a large tax bracket, there are limits as to how much you could deduct.

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