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Level 1

Home loan fees

What part of home loan costs besides points are deductible?

4 Replies
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Employee Tax Expert

Home loan fees

The following loan costs are generally deductible.

 

  • Sales tax issued at closing
  • Real estate taxes charged to you when you closed
  • Mortgage interest paid when cost was settled
  • Real estate taxes that were paid for by the mortgage lender
  • The interest you paid at the house’s purchase
  • Loan origination fees (a.k.a. “points”). These would be written as a percentage of the borrowed money.
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Returning Member

Home loan fees

I have a question - maybe you can help.  I completed a loan modification in May 2019 with my current lender to get a better interest rate (4.25% to 3.5%) and to shorten the term of the loan (30 Yr Fixed to 15 Year Fixed).  I paid a "modification fee" of 1% on the new principal balance.  Is this tax deductible?  Thank you.

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Employee Tax Expert

Home loan fees

Yes, the "modification" fee is prepaid interest on your mortgage and is deductible as interest paid on your mortgage.  You will have to itemized your expenses to claim the deduction.  If you take the standard deduction you will not be able to deduct the interest on your mortgage.

 

The standard deductions for 2019 are.

  • Single - $12,200 add $1,650 if age 65 or older add.
  • Married Filing Separately - $12,200 add $1,300 if age 65 or older.
  • Married Filing Jointly - $24,400 add $1,300 for each spouse age 65 or older. 
  • Head of Household - $18,350 add $1,650 if age 65 or older. 

 

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Returning Member

Home loan fees

Thank you for your response.  I assume this fee needs to be deducted over the term of the loan (15 years) and not taken in a lump sum in 2019, correct?  Do you know which IRS publication I can refer to for guidance?  I really appreciate your help!