Your Adj Org Charges - Pd from Borrower's

[AZ-Tax]

On HUD-1, when an "Adjusted Origination Charge" amt appears under the "Paid From Borrower's Funds at Settlement" column, mean the Charge is fully deductible in tax year or could still need to be amortized over life of loan?

[BP.]

Treatment depends on whether refi or purchase.

[Jesse]

I thought the purpose of the origination fee needed to be to reduce the interest rate of the loan just like points, however was corrected on a different thread.

But my understanding is it needs to be a percentage of the loan.

The taxpayers often don't know so the only way to determine this is to search the loan documents. On one refi I had I actually found a breakdown of the adjusted loan origination fee with part a "document prep fee" and the other a "service charge". To me it did not appear to be anything but a flat fee so I did not deduct at all.

I have another bank in our area that has everything on the HUD statement circled and the taxpayer told to make sure to remember to deduct this on your tax return. The taxpayer too often then looks at me like I'm the incompetent one! Why do the banks need to make it so difficult?

[AZ-Tax]

Jesse, the Bank, Securities firms etc....its B.S.

I cannot remember how many TP's over the yrs came and said, "My banker said I will not have to pay a penalty for taking a premature withdrawal from my IRA". Stockbrokers telling TP's their investment loss is tax deductible so you will recoup your loss via tax savings and your situation Jesse with that Bank circling what they think in their opinion is tax deductible on a HUD. It all has to do with settling down the client to make the client feel better and think of something else. It has nothing to do with truthfullness. Jesse, probably in your Banks case, the TP was concerned or even irate with their HUD fees so why not tell the client is all deductible and what the heck, add to that by deducting it, you will receive it all back in the form of tax saving for which we tax preparers know that is FALSE.

[JohnH]

Absolutely correct. HUD-1 forms, brokerage statements, etc are not designed to inform. They are intentionally confusing because a befuddled customer is easier to manipulate. Most of these documents are masterpieces of obfuscation.