Question:

Are mortgage loan origination points tax deductible?

Answer:

Here it goes: mortgage loan origination points are tax deductible if they represent the cost of money to the lender and do not include other per item charges as appraisal and inspection fees, for example.

Sometimes loan origination points are clearly declared as such - as a loan origination fee charged by the broker or lender. Home loan origination points are not tax deductible if they are include title fees, appraisal cost, attorney fees, etc. services provided by third-party companies.

Mortgage Origination Points Tax Deduction in General

The points paid for loan origination and mortgage discount points have to be clearly stated on the HUD-1 Settlement Statement.

The funds the homebuyer provides upon closing together with seller-paid points need to be at least as much as whatever points were charged for mortgage discount points and loan origination points to be deducted.

Mortgage loan origination and discount points will be tax-deductible in full in the year they were paid when purchasing a primary home. Home loan points paid in connection to a refinance or a second home purchase are not deductible in full in the year they are paid, but over the life of the loan.

If a loan is refinanced again, any eligible points remaining to deduct for the first refinance can be written off immediately. The same goes if the loan was amortized on accelerated terms - the remaining points to be deducted over the end of the preliminary amortization schedule, if any, can be written off, as well.

Sometimes mortgage origination points are mortgage discount points.

Sometimes the interest rate/point combination will appear cheaper with some lenders compared to other quotes. To get a realistic mortgage loan cost comparison, loan origination points have to be considered, too.

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