Loan Origination charge

[Jesse]

Taxpayer obtained a construction loan and was charged on HUD line 801: $850

When closed the construction loan into the conventional on HUD line 801: $350

Would these both be fully deductible?

[Jesse]

Okay, I'm talking to myself!

I thought loan origination fees or points were deductible only if paid to reduce the rate.

Went to TTB 6-2 - HUD statement Line 801-803 - deductible - so I'm thinking they are deductible.

If a refinance (or 2nd home) they need to be amortized over life of loan, that's why I question the 2nd loan to be a refi of the construction loan or still as original purchase?

Now I question both - how do you determine if the charge was for the reduced rate or for obtaining the loan?

HUD line 802: Points for specific rate chosen

If the fee is rate related shouldn't it be on line 802 and not 801 - so I conclude that the fee is not deductible at all, (even though their banker assures them "all the closing costs are deductible").

[DonB]

Imho

I don't believe the points have to be rate related, but must be a percent of the amount loaned and customary for the area. Both are deductible as the new loan is a replacement for a temporary loan.

[Burke]

I agree with this.