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86 Comments on IS THE ORIGINATION "POINT" DEDUCTABLE?? YES! The IRS says so!
Lenn,
Being a CPA (retired) and a now a real estate Broker, I agree with the comments and concerns raised by Jason #59. However, if just discussing loan origination fees or points, I don't see this as anything that will land anyone in court. Nor do I see any reason to pay a CPA for advice on something as straight forward as loan origination fees or points. However, this is still a very slippery slope and a simple question on loan fees may lead to additonal questions that you might find yourself trying to give an opinion on based on your own experience or reading of tax law, and this could get you in hot water. I'm also a bit uncomfortable even referring clients to go to a website for tax advice (IRS website or any other website) as it still requires an "intrepretation". CPA's don't write tax law, they just intrerpret it and then give advice based on thier interpretation. The difference is that they are licensed to provide "tax advice" based on intrepretation of tax laws. Real estate agents are not.
Again, while not overly concerned with something as simple and straght forward as loan fees, it is just not a good habit to get into. Best to just just tell your clients to make sure they keep a copy of their HUD-1 and other purchase documents for when they have their taxes done so their tax preparer can make sure they have taken advantage of all available tax deductions.
Ben Yost. You'd be surprised at the research material I give my buyer clients. However, I don't blab about everything I do on ActiveRain. After all, my posts are regularly read by my competition....mmmmmmmmmm.
I give my buyers a wealth of information because I'm a fact junkie. But, I back it up with source material.
So there.
Larry. How many folks do their own taxes??? I wouldn't presume that everyone uses a tax pro.
This post was inspired by another post that made the simple statement that Origination fees are NOT tax deductible. I knew differently.
That's the beginning and end.
That said, it was good of loan pros to clearify "origination fee" which the IRS site also does.
Larry. How many folks do their own taxes??? I wouldn't presume that everyone uses a tax pro.
This post was inspired by another post that made the simple statement that Origination fees are NOT tax deductible. I knew differently.
That's the beginning and end.
That said, it was good of loan pros to clearify "origination fee" which the IRS site also does.
Lenn, your post is very timely. With rates as low as they are many people are refinancing and if they paid point(s) on their existing refi, the balance of the unearned point(s) paid may be eligible as a tax deduction. I've run into several borrowers who had to get their tax return ammended to include the unearned point(s) as a deduction.
Yes.... many people prepare thier own taxes, rather than using a tax pro. However.... this is irrelevant. And not something a real estate would normally even be aware of, nor should be. It really does not change anything regarding a real estate agent intrepreting tax law read on an IRS website and advising their client based on their reading or intrepretation. Nor, as Paul #65 correctly pointed out, should a real estate agent refer a client to an IRS website as not everyone interprets tax laws the same way (including CPA's, tax attornys and even IRS personnel) and any incorrect intrepretation may be attributed back to the real estate agent. Also, while this particular issue is not likely to land anyone in tax court, you never know what other "deductions" your client may be taking that may be disallowed during a tax audit, or even worse, considered fraudulent by the IRS agent thereby ending up in a tax dispute or tax court. Is giving a client even what seems to be simple and straight forward advice such as this, worth the potential risk of having your name brought up in a tax dispute or court case? Or, what if the client sees an opportunity here to try to intentionally bring your name up as having advised them to do their own tax research? And then try to sue you? Why even put yourself at risk for something so irrelevant to getting the real estate transaction done? Much better to practice risk management and risk avoidance whenevere you can.
Again... best to just just tell your clients to make sure they keep a copy of their HUD-1 and other purchase documents for when they have their taxes done (or do them themselves) so (they) or their tax preparer can make sure they have taken advantage of all available tax deductions.
I agree
Robert. With whom do you agree? Do you agree with me suggesting (with verification for individual facts) that an origination fee may be deductible??
Or with Larry who doesn't believe that we should write about such matters???
I love the IRS site, it's very easy to understand and search. No tax advice here...but yes, that's my reading of the IRS rules and I have used that deduction on my own purchases.
Karen. I love the IRS site too. I recall how helpful it was to help folks with the tax credit. It's written in plain English and very helpful.
I print that page for home buyers too. They get it at first meeting.
THANKS RE-BLOGGERS.
Re-blogged by 22 agents
I always refer folks to the IRS website.. and to their accountant.. Some things are NOT clear at all... and the tax code is very difficult to understand on some points. There are some great pamphlets for what is deductible as well.
Lenn
Your post calls to mind a whopper of bad advice given by real estate agents,
loan officers, accountants, attorneys, financial planners, friends relatives and aquaintances.
Are you ready for this one???
Thanks for the link. Tell clients go read it. If you have questions ask your tax professional.
Joan. The nice thing about this site is that it isn't the tax code. It is a consumer site explaining the tax code.
Bob. I haven't the foggiest idea what you mean.
Mike. Sadly, there are millions of folks who buy homes who do not use a "tax professional". They use Turbo Tax.
ReBlogged by 23 Agents! ;-)
Great Post! Thank you for taking the time to do the research. Proud to have it on my site. Joy
Loy and Jeff. We don't have to give tax advice. Just send folks to the IRS web site.
THANKS RE-BLOGGERS - WOW!
Re-blogged by 25 agents
This is good stuff. I will have to remember Jeff Bs approach and suggest it when necessary. Thanks.
Wayne. Perhaps. However, if the IRS looks carefully at a HUD-1, the fact that the origination/point fees includes othere non-deductible fees, they could be disallowed. My accountant is a former IRS examiner and says that they know the difference.
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