Loan Origination fees

[Gretel]

Well, this is what the IRS says:

http://www.irs.gov/taxtopics/tc504.html

8. The points were computed as a percentage of the principal amount of the mortgage, and
9. The amount is clearly shown as points on your settlement statement.

Looks to me that the points could be any % as long as this is what it is. If the math shows .33 that could be fine but not .3333333.

[Gary2]

The item about points having to be based on a percentage of the loan only appears in the section on deducting points in full in the year of purchase.

So, does this mean that the portion of the origination fee that appears as a flat fee, not based on the amount of the loan, but also not tied to any specific service, can be amortized over the life of the loan? Typically it's a small amount (e.g. a $300 origination fee on a 30 year mortgage is only $10/year), but every bit counts.

[JohnH]

Points are simply interest under a different name. A flat fee is not points. It cannot be deducted or amortized (unless it's on a rental property).

The basic definition of points requires that they be calculated as a percentage of the loan. This automatically excludes flat fees of any type. It doesn't exclude round numbers, because round number principal amounts multiplied by the rate sometimes calculate out to a round number for the points, but it does exclude flat fees which are not calculated as a percentage of the loan.

http://www.irs.gov/taxtopics/tc504.html

Items 8 and 9 on the list are important.

That's my story and I'm stickin' to it (unless I'm proven wrong)