Deducting Mortgage Origination Fees

Mortgage interest, such as home loan origination costs, maximum loan charges, and loan reductions, may be deducted using the point system. One point is equivalent to 1% of the loan amount. When you buy a property, the points you pay (and even the seller pays) are normally tax deductible in full the year you pay them. To get the full deduction, you must:

use the cash technique
having utilized the mortgage to buy or develop your primary residence have secured the mortgage loan with your primary residence

AND

In your location, point charging is a well-established commercial practice.
The deduction does not exceed the standard amount of points levied in your region.
You did not borrow the money used to pay the interest.
The settlement statement shows the number of points paid for the transaction.
The points represent a proportion of the principal amount of the mortgage.

You may also opt to amortize the points over the life of your mortgage. This option is often used only when your itemized deductions are smaller than the standard deduction for the year you purchased the house.

The points paid to refinance a loan must be subtracted during the loan’s duration. If you deduct points during the length of the loan and then sell or refinance the house before the loan ends, you may deduct any points not previously deducted in the year of the sale or refinance.