Mortgage origination fee "expressed as points"?

Feb 15, 2010 2 Replies
I

I've read at in multiple places that a mortgage loan origination fee must be "expressed as points" or "shown as points" in order to be deductible.



Huh?



Is this just a fancy way of saying that the fee must be calculated as a percentage of the principal amount? (And if so, why couldn't they just say that?)



Or does it mean that the word "points" must appear on that line on the settlement statement? (Doesn't really make sense, if line 801 is supposed to be generally deductible.)



Or does it mean something even more mysterious?



Thanks!


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B

I have deducted the amount on Line 801 as points, can't remember if I've seen anything on Line 803. I believe in IRS world, it's interest (and deductible) if it represents a charge for the use of the money. If the fees represent compensation to the lender for the cost of specific services performed, then it's not interest. Sorry, too tired to look up citations.

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A

The word points does not have to appear as various lenders use different terms. One of the requirements for deducting "points" is that the amount is computed as a percentage of the principal amount loaned. There are other requirements for deducting "points" on acquisition debt in the year paid. They are all identified on page 5 of IRS Pub 936, Home Mortgage Interest.

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