Is "Lender Origination Fee" on my main home tax deductible or not?

Forum|Forum|5 years ago
March 14, 2021
3 replies
2 views

I have done a refi in 2020 on my main home (the only property I have). In the "origination charges" section of the closing disclosure, there are 2 items. 1) "% of Loan Amount (Points)" is $0 as I did not pay points to lower the rate. 2)"Lender Origination Fee" is $1465. I am trying to figure out if the $1465 is tax deductible.

I think some ppl in the forum says yes, but I was looking at this official article saying that "Origination points are not deductible on non-rental property."

https://ttlc.intuit.com/community/credits-and-deductions/help/what-are-points/00/26637

I am so confused now, hope someone can help me to clarify it. Thanks a lot in advance!

DaveF1006

Level 15

Yes, the origination fees are sometimes the same as points and are tax deductible in your return. What that article was referring to is that lenders use terminology like origination fees for things like loan processing costs such as fees for appraisals, inspections, title, attorneys, notaries, and real estate taxes. These things just mentioned are not deductible.

Mostly loan origination fees refer to a fee the lender charges if you wish to lower your interest rate. This type of fee is tax deductible. For clarification, you might look over the documentation statements regarding your loan. The disclosure statement should offer an explanation what the origination fee consists of. if it does mention things like fees for appraisals, inspections, title, attorneys, notaries, and real estate taxes, then these are not deductibles. if it is a fee for lowering your interest rate, this is considered points and is deductible.

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mazytesAuthor

Level 2

Hi DaveF1006,

Thanks for your quick response. In my case, the "Lender Origination Fee" does not include appraisals, inspections, title, attorneys, notaries, and real estate taxes, they were all listed separately (mostly under "Serviced Borrower Did Not Shop For". But this origination fee is not to lower my interest rate neither (as I mentioned in the original post).

So I guess my question is still not answered yet.

JoannaB2

Level 9

The amount of $1,465 could be appraisals, legal fees, prepaid real estate, mortgage interests, and other fees associated in getting the home loan. Of the items mentioned above, prepaid property taxes and mortgage interests are the only fees that are deductible. You can check back on the closing statement and verify the description of the closing costs.

Some closing costs are deductible such as loan origination fees or discounts. A mortgage origination fee is an upfront fee charged by a lender to process a new loan application. Tax-deductible closing costs can be written off in three ways:

Deduct them in the year they are paid.
Deduct them over the life of the loan.
Add them to your basis when you sell the home.

The following are non-deductible closing costs:

Homeowners insurance premiums
Monthly principal payments
Utility costs (gas, water, electric)
Money lost on a sale that fell through
Home appraisal fees.
Notary fees
Document preparation fees

gloriah5200

Level 10

Prepaid items are not deductible until they are paid out of the escrow account they are put into.

For example, generally homeowners insurance, and # of months of real estate taxes and mortgage interest are prepaid and put into an escrow account. It is not deductible going into the escrow account. They may be deductible when paid out of the escrow account, but will be reported to you as paid when going into the end of the year on tax reporting documents.

cfin1085

Level 2

Would the $1,465 be deductible if the other fees (e.g. appraisal fee, attorney doc review, etc.) are listed elsewhere and the 1,465 consists of the processing fee and underwriting fee? For me, the processing fee and underwriting fee are under the origination charges as a flat amount e.g. $1000. thanks

ColeenD3

Level 15

None of these fees are deductible. Closing costs are added to the basis of the house.

The following items are some of the settlement fees or closing costs you can include in the basis of your property.

• Abstract fees (abstract of title fees).

• Charges for installing utility services.

• Legal fees (including title search and preparation of the sales contract and deed).

• Recording fees.

• Surveys.

• Transfer taxes. Intangible taxes.

• Owner's title insurance.

• Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions.

Carl

Level 11

Fees/Expenses associated with acquisition of the property are added to the cost basis of the property. In the case of a refinance you do not have any of these costs since you already own the property prior to the refinance.

Fees/Expenses associated with acquisition of the loan are deductible. For your primary residence they are fully deductible in the tax year you close on the refi loan. For business property, such as rental real estate, they get amortized and deducted over the life of the loan.