POINTS on Refi & broker compensation fee ??

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  • nwtaxlady
    Senior Member
    • Sep 2009
    • 418

    #1

    POINTS on Refi & broker compensation fee ??

    New Client had refinanced. Looking at the Closing Disclosure statement Under the Origination Charges is listed .245% of loan amount (points) and right underneath that is listed Broker Compensation to John Doe and that amount is $6,627.38 which happens to equal 1.7% of the loan amount of $ 389,846. So Can I add that to the points, since it is a percentage of the loan. He refinanced with Quicken Loans.

  • Anarchrist
    Senior Member
    • Oct 2006
    • 351

    #2
    Everything is a percentage of the loan. I doubt a commission can be considered prepaid interest. What does the 1098 list as points?
    "Taxation is the price we pay for failing to build a civilized society." ~ Mark Skousen

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    • FEDUKE404
      Senior Member
      • May 2007
      • 3646

      #3
      Interesting scenario. I have a client who refinanced in 2021. Just got their tax records today. I may need to look around. . .further.
      I agree with the comment made by Anarchrist.

      Points on a refi have to be amortized over the life of the (new) loan or until that loan is paid off. I have no idea how the new and improved Form 1098 will handle that matter!

      Please keep us updated.

      Comment

      • New York Enrolled Agent
        Senior Member
        • Nov 2006
        • 1530

        #4
        Originally posted by nwtaxlady
        New Client had refinanced. Looking at the Closing Disclosure statement Under the Origination Charges is listed .245% of loan amount (points) and right underneath that is listed Broker Compensation to John Doe and that amount is $6,627.38 which happens to equal 1.7% of the loan amount of $ 389,846. So Can I add that to the points, since it is a percentage of the loan. He refinanced with Quicken Loans.
        IRC 461(g) states “points” (aka prepaid interest) represents the interest charge for the use of money. The broker compensation does not represent an interest charge for the use of money.

        Comment

        • nwtaxlady
          Senior Member
          • Sep 2009
          • 418

          #5
          Originally posted by FEDUKE404
          Interesting scenario. I have a client who refinanced in 2021. Just got their tax records today. I may need to look around. . .further.
          I agree with the comment made by Anarchrist.

          Points on a refi have to be amortized over the life of the (new) loan or until that loan is paid off. I have no idea how the new and improved Form 1098 will handle that matter!

          Please keep us updated.
          Yes, I am aware of that. Just wondering if can include the Brokerage fee since it was a % of the loan. Doesn't look like it. Thanks.

          Comment

          • nwtaxlady
            Senior Member
            • Sep 2009
            • 418

            #6
            Originally posted by New York Enrolled Agent

            IRC 461(g) states “points” (aka prepaid interest) represents the interest charge for the use of money. The broker compensation does not represent an interest charge for the use of money.
            ok.. I don't think it is prepaid interest. So in that case, NO. Thanks!!

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