Can you deduct origination fees on a refinance

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The buyer may deduct points paid by the seller, provided the buyer subtracts the amount from the basis or cost of the residence. You can only deduct points you pay on loans secured by your second home over the life of the loan.

More In Help. You can deduct the points in full in the year you pay them, if you meet all the following requirements: Your main home secures your loan your main home is the one you live in most of the time. Paying points is an established business practice in the area where the loan was made. The points paid weren't more than the amount generally charged in that area. You use the cash method of accounting. Points involve a loan discount fee.

Every point, which is prepaid interest, is equal to 1 percent of the total loan. For practical purposes, however, the IRS views both origination fees and points as prepaid interest. You can deduct these points in the year you purchased the home if you meet several criteria, although you have the option of deducting them over the life of the loan.

Most homeowners, however, do not want to deduct these fees over 20 to 30 years if they can do it all at once. To qualify for the same-year deduction, the home must serve as your primary residence or you are building a primary residence on the lot. If the property is a second home, you must deduct origination charges over the life of the loan. Send feedback to the editorial team. Rate this Article. Thank You for your feedback! Something went wrong. Please try again later.

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