Question:

Is origination fee tax deduction possible?

Answer:

Loan origination fee tax deduction is possible when it was used to get you a loan and didn't cover other loan related costs. Common loan origination fees are 1 or 2 points (1 or 2 percent) of the loan amount.

Loan origination points are tax deductible depending on the transaction they were paid in. For example, if you are getting a first mortgage and paying $4000 in origination points, this fee will be deducted in the same year the home purchase was made. The same goes for equity loans - HELOCs, HELOANs and second mortgages. If you are refinancing, origination fee tax deduction is spread over the years - for $4000 in 20 years, you will be entitled to $200 tax deduction every year.

Also, origination fee tax deduction is different for primary and second homes. Points paid in obtaining second homes will be paid under special requirements, and your second home doesn't need to be in fact a house.

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