Here is one that I almost missed re-blogging! When it comes to what is deductible from the IRS I agree with Lenn, GO TO THE IRS WEBSITE to find out, don't ask the closer, realtor, lender or your great grandmother!
IS THAT ORIGINATION POINT ON YOUR HUD-1 DEDUCTIBLE? READ THE IRS WEB SITE AND THE ANSWER IS PROBABLY YES, YES, YES.
YOU'D BE SURPRISED HOW EASY THE IRS WEB PAGE IS TO READ.
Agents and loan officers sometimes advise buyers and sellers about the deductablity of the certain items on the HUD-1.
For instance, home buyers often ask their real estate agent or loan officer questions about detectability of closing costs. Sellers ask too, but not as often. Buyers often depend on the detectability of mortgage interest to bridge the gap between renting and buying. Clearly, the higher the income, the more valuable the tax deduction is to a home buyer.
DON'T GIVE TAX ADVICE. Send that buyer to the IRS web page and let them read the section on HOME MORTGAGE INTEREST AND POINTS. However, many agents and loan officers make the mistake of telling buyers that the discount point is deductible but that the "origination fee" is NOT. WRONG!!
THE ORIGINATION FEE or point IS DEDICTABLE. That's not Lenn's advice. That's from the IRS.
Read the IRS Instructions for Points.
WARNING TO CONSUMERS AND ALL. THIS MATTER IS COMPLICATED AND I RECOMMEND READING THE IRS WEB SITE. The Devil is in the details.
The term "points" is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points (emphasis added).
ATTENTION HOME BUYERS! Don't ask your real estate agents or loan officer for tax advice. Consult your accountant or the IRS web page. It's in plain English and very helpful.
Let's get this matter cleared up once and for all. A POINT IS A POINT IS A POINT. A point is ONE PERCENT of the loan amount. Call it a butterfly or a shark. An Origination Fee is a POINT.
Save your HUD-1. The points, all of them, even if paid by the seller are deductable for you. You can find that on the IRS site too.
ARE MORTGAGE LOAN ORIGINATION FEES DEDUCTIBLE?? YES, YES, YES.
NOTE: See John Cannata - LegacyTexas Mortgage Sr Loan Officer's comment below. It goes into more detail that I wanted to do but he is correct, which is also clear on the IRS web site.
Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.
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