Points on Mortgage

[coralfragger101]

What is the name of your state? FLORIDA

Not sure if this should have been posted in the Real Estate or the Tax Section but here goes:

It is my understanding that you can take the Points (Loan Origination Fee) from a mortgage as a deduction on your Fed Tax Form.

It is my understanding that you must amortize this amount over the life of the loan.
Example: If you paid $1,000 in loan origination fees on a 30 yr loan then you could only take a $100 deduction per year for the next 30 years.

It is my understanding that if the load is paid off early, then you can deduct the remainder of the amount in the year that the loan was paid off.
Example: Same as above example except that you took out the original loan in Jan of 2006 and for whatever reason you refinance and go to closing in Dec of 2006, therefore the original loan WAS paid off in 2006 and you would be able to take a $1,000 deduction for the year of 2006.
QUESTION #1: Is this correct?

A lot of mortgage companies that issue the original loan often times sell that mortgage. Sometimes almost immediately and sometimes they do it down the road (after a year or two).

QUESTION #2: If your bank sells your mortgage, even though you didn't refinance or pay off the mortgage - it still seems to me that the original loan WAS paid off early and that the remainder of those points would now be eligible to be deducted in the year that your mortgage company sold the loan. Is This Correct ?

[JETX]

Your questions are NOT legal... they are tax accounting.
Ask your local CPA.

[efflandt]

Points may be deductable, but other closing costs (like loan origination fee) are NOT deductable, but become part of your basis when you sell the home. See [url]http://www.irs.gov/publications/p530/index.html[/url]

If your loan is sold, YOU did not pay it off, so your obligations or what you can deduct when are unchanged.

[coralfragger101]

Tax Laws are not Laws ???????
Does a CPA not answer tax questions through knowledge of tax law?
How can this not be a legal question? and why have forum headings of Real Estate Law and Mortgage, Refinancing & Foreclosures if this isn't " Legal " ?

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From Pub530: The term _points_ is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points.

On the settelment statement there is a Loan Origination Fee. This fee is NOT for all the other services like the appraisal, copies of paperwork, etc.

It still appears to me that this is a legitimate deduction.

[justalayman]

Originally Posted by coralfragger101

It still appears to me that this is a legitimate deduction.

Then by all means, go for it. The only one you actually have to convince of you being correct is the IRS. They have a nasty habit of being right most of the time. Even when they are wrong, you usually wish you hadn't tried to take the chance.

While you posted this:

From Pub530: The term _points_ is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points.

This merely explains the term of "points" using alternative terms
It does not expalin how the points are to be treated.

And the "paid off loan" position,,,,,,,,nice try, won;t fly. The loan was not paid off by anybody, the papers (debt) was sold. The loan stays intact witnessed by your lack of requirement to sign anything to re-affirm the old loan or establish a new loan. If the loan had been paid off, you would no longer have a debt because of it. There is a huge difference between a loan being paid off and a debt being sold.

[coralfragger101]

I wasn't asking the "paid off loan" aspect of my question concerning if the mortgage company sells the loan because that is the case - it isn't.

I did a refinance - so I did have to sign paperwork, etc (new loan). Therefore the old loan was paid off.

I simply asked the question because I believe I can deduct the entire points from the initial loan now. I just don't want them coming back to me and saying - NO, you should have deducted the entire amount last year when the mortgage company sold your account to someone else.

Understand?

[justalayman]

I wasn't asking the "paid off loan" aspect of my question concerning if the mortgage company sells the loan because that is the case - it isn't.

Well, actually you did. This is from your first post:

QUESTION #2: If your bank sells your mortgage, even though you didn't refinance or pay off the mortgage - it still seems to me that the original loan WAS paid off early and that the remainder of those points would now be eligible to be deducted in the year that your mortgage company sold the loan. Is This Correct ?

Ya see up there where you said "didn't refi or pay off mortgage?" and "if you bank sell your mortgage"? So you did, at least in the very start of you inquiries ask it in perspective as I have addressed.

I did a refinance - so I did have to sign paperwork, etc (new loan). Therefore the old loan was paid off.

I think this post is the first time you stated this. No, actually I know this is the first time you posted this.

I simply asked the question because I believe I can deduct the entire points from the initial loan now. I just don't want them coming back to me and saying - NO, you should have deducted the entire amount last year when the mortgage company sold your account to someone else.

So which is it? Did you refi or did the mortgage get sold? Now you are stating it as if the mortgage was sold, not refi'd.

Understand?

Absolutely not. You keep changing the question.

[coralfragger101]

Originally Posted by justalayman

Well, actually you did. This is from your first post:

Ya see up there where you said "didn't refi or pay off mortgage?" and "if you bank sell your mortgage"? So you did, at least in the very start of you inquiries ask it in perspective as I have addressed.

I think this post is the first time you stated this. No, actually I know this is the first time you posted this.

So which is it? Did you refi or did the mortgage get sold? Now you are stating it as if the mortgage was sold, not refi'd.

Absolutely not. You keep changing the question.

I asked TWO questions in my original post. It isn't a matter of "which is it?"
I was looking for answers to BOTH questions because in reality - BOTH have happened to me.

How can this be? Well - to be honest with you, the IRS is looking for FOUR years of returns that have not been submitted yet. (can only imagine the response this will bring)

NOW do you understand?

[justalayman]

No, but here are the answers to your first post.

#1. yes per this website:[URL="http://www.1040form.com/tax_tips/deduct_points.htm"]tax tips[/URL]

#2 no