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

[mazytes]

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]

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.

[mazytes]

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]

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:

1. Deduct them in the year they are paid.
2. Deduct them over the life of the loan.
3. 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

[mazytes]

Hi JoannaB2,

Thanks for your response. I am a little confused when you say "prepaid property taxes and mortgage interests are the only fees that are deductible", and then "Some closing costs are deductible such as loan origination fees".

I did some research, and see contradictory answers on whether the mortgage origination fee is deducible.

[gloriah5200]

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]

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]

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]

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.

[driney1]

I purchased a home and have the following fees paid to the lender "fee to lender name", are any of these considered origination fees for deductibility purposes?

Document preparation fee

Porcessing Fee

Underwriting fee

Thanks

[DawnC]

No.   If you bought your home, you probably paid settlement or closing costs in addition to the contract price.   These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. If you built your home, you probably paid these costs when you bought the land or settled on your mortgage.

The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. You deduct them in the year you buy your home if you itemize your deductions.  You can add certain other settlement or closing costs to the basis of your home.   See IRS Pub 530

I bought a house, what can I deduct?   

@driney1