Refinanced in 2016 and paid an origination fee for the new loan. Does not appear on the 1098 but listed on the closing disclosures as origination fee. Is it deductible?

[pgskttax]

I refinanced in 2016 and paid an origination fee of $1490 for the new loan. This item and sum does not appear on the 1098. It is listed on the closing disclosures as an origination fee. There is a lender's credit of nearly $5000. There is no mention of points. My understanding is that I did not pay any fees (ie. points) to lower the interest rate. I do not know what the origination fee is. I thought it was just the cost of originating a new loan.  Is the origination fee deductible? Is it considered points and therefore deductible? Does the fact that I have a lender's credit more than the origination fee mean that is it not deductible? Many questions but please help clarify. I see this question asked in several places but the answers are generic and distinction between "points" and "origination fees" is not addressed by any of the answers. This is what I would really like to home in on besides the lender's credit. Please help shed some light on this. Thanks very much!!! 

[KarenL2]

The terms "points" and "origination fees" are interchangeable when it comes to deductibility.  It is considered to be a type of interest that is deductible ONLY if it is based on a percentage of the loan value.  (Points can also be called loan origination fees, maximum loan charges, discount points, or loan discount.)

Your origination fee is deductible, but for a refinance, they have to be spread out over the term of the loan. The software will prompt you to select that.   The lender's credit won't matter in this situation. Basically, what it does is cover the "current" out of pocket costs so you didn't have to come up with the cash.

It goes in the same area as your regular mortgage interest.  When you enter the new mortgage interest, the software will ask you questions about the new loan and you will be able to select that it was a refinance.

• Federal Taxes tab (Personal in the Home and Business Version)
• Deductions and Credits
• Your Home
• Mortgage Interest and Refinancing (select Add a Lender if you have already entered one)

You can also deduct any interest or real estate taxes on your Settlement Statement that are not already included on your Form 1098. Only pro-rated amounts can be deducted, not prepaid amounts held for escrow.

What kinds of refinancing costs can I deduct? 

https://ttlc.intuit.com/replies/3300426

[pgskttax]

Thank you very much for your answer TurboTaxKarenL2 !!! Could you clarify the following: In your first paragraph you have said that the points/origination fee is ONLY deductible if it is based on a percentage of the loan value. But in the second paragraph you say that my origination fee IS deductible. I'm a little confused by this. How do we know at this point that the origination fee I paid ($1490) IS based on percentage of the loan value? I'm not sure if it is or not at this point. I'm going to try to find that out from the lender but at this point how do you know to state that my origination fee is deductible? Or are you just stating that IF in fact my origination fee IS based on a percentage of the loan value THEN it is deductible but has to be spread out over the term of the loan because its a refinance?? Please help me understand. THANK YOU!!

[KarenL2]

Yes, you are correct.  If it is based on a percentage of the loan, then it is deductible. Normally, an origination fee is based on the loan value.  It is rare to be called an "origination fee" if that is not the case.  Points aka Origination fees can be called several different names on the settlement sheet so I have to clarify that it is only deductible if it is based on loan value.  Therefore, anytime you have a "fee" that you think might be considered a deductible point/origination fee (but might be listed as a different name such as a "maximum loan charge", it is only deductible as an "origination fee" if it is a percentage of the loan value.  If yours is listed as an origination fee, you can be comfortable knowing it is deductible...spread out over the term of the loan.

[pgskttax]

Thanks very much TurboTaxKarenL2! Your answer and the detailed information you have provided is very helpful to me!!

[KarenL2]

You're welcome!

[pgskttax]

Hi TurboTaxKarenL2, hope you are doing well. I have posted a related question here: <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/4087988">https://ttlc.intuit.com/questions/4087988</a> Would you please care to comment on this? Thank you!!

[mazytes]

I was looking at this official article saying that "Origination points are not deductible on non-rental property."

I am so confused if "Lender Origination Fee" on my main home is duductible or not

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

[JohnW152]

If the fee covers the loan processing costs or fees for appraisals, inspections, title, attorneys, or notaries, it's not deductible. 

If you're not sure what it covers, you should check with your real estate agent.

[mazytes]

It doesn't cover appraisals, inspections, title, attorneys, or notaries, as they are all listed separately.

Regarding loan processing costs, I am not sure, some ppl are saying loan processing costs is a percentage of your loan amount, then it's considered as points, therefore tax deducible. I see contradictory answers on this, interesting.