Are discount points and loan origination fee tax-deductible?

Hi, Pamila

Lender charges some fee from the borrower at the time of closing and those fees paid are called points. There are 2 types of points: Origination fee and discount points.

Discount points are tax deductible but origination fees or points are not. The Discount Points are deducted under Schedule "A" of the IRS 1040 tax return of a borrower. If a borrower does not itemize his deductions (by taking the Standard Deduction) for other tax-related reasons, he will not be able to deduct the cost of the discount points while filing his tax returns.

It is better to consult with your tax adviser as to whether you qualify for these deductions.

Hope this will give you a complete idea on all the tax related issues.

Thanks


[Edited by Jessica, made minor changes. Thanks.]

But are paying points mandatory?

Actually paying points will allow you to lower down your interest rate.

Discount points are actually prepaid interest on the mortgage loan. The more points you pay, the lower the interest rate on the loan and vice versa.






[Edited by Jessica, made minor changes. Thanks.]

Actually point depends on number of factor, such as how much money you have available at closing and how long you plan on staying in your house.

If you plan to stay in your home for awhile, it may be worth reducing the interest rate by paying points.

The best option depends on your needs, but, if you need the lowest possible closing costs, choose the zero-point option on your loan program.

Thanks

Hi Niicss

Thanks a lot for the information. :D :D It is really helpful.

Niicss information would be more helpful if it were accurate. Origination fees are tax deductible on your primary home. See the section on Points in IRS Publication 530

yes, cbh, but it apparently worked well enough back in 2005 for that earlier poster.