Deducting Home Loan Origination Fees

1 min read

You can deduct mortgage interest— such as home loan origination fees, maximum loan charges, and loan discounts— through the point system. One point equals 1% of your mortgage loan amount. Points you pay (and even points the seller pays) when you purchase your home are generally tax deductible in full the year you pay them. In order to get the full deduction, you must:

use the cash method
have used the mortgage to purchase or build your main home
have secured the mortgage loan with your main home

AND

point charging is an established business practice in your area
the deduction doesn't exceed the number of points usually charged in your area
you didn't borrow the funds used to pay the points
the settlement statement gives the amount of points paid for the closing
the points are a percentage of the amount of the mortgage's principle

Alternatively, you may choose to amortize the points over the term of your mortgage. This choice is usually made only when your itemized deductions are less than the standard deduction for the year you bought the home.

Points paid to refinance a loan must be deducted over the term of the loan. If you deduct points over the term of the loan and sell the home or refinance it again before the loan expires, you can deduct in the year of the sale or refinancing any points that you didn't previously deduct.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

Ask a lawyer

Our On Call attorneys are here for you.

Rocket Lawyer On Call_® Attorneys

Try Rocket Lawyer FREE for 7 days

Start your Premium Membeship now and get legal services you can trust at prices you can afford. You’ll get:

All the legal documents you need—customize, share, print & more

Unlimited digital signatures with RocketSign^®

Ask a lawyer questions or have them review your document

Dispute protection on all your contracts with Document Defense^®

30-minute phone call with a lawyer about any new issue

Discounts! Incorporate for FREE + hire a lawyer with up to 40% off*

Try it free for 7 days

SEE MEMBERSHIP DETAILS

*Free incorporation for new members only and excludes state fees. Lawyer must be part of our nationwide network to receive discount.

Trusted and secure

Share this

Related Guides

2021 Child Tax Credit Legal Guide

Deducting Charitable Donations

Tax Credits

Try Rocket Lawyer FREE for 7 days

Start your Premium Membeship now and get legal services you can trust at prices you can afford. You’ll get: