Pre-payment penalties

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  • oceanlovin'ea
    Senior Member
    • Jun 2005
    • 2682
    #1

    Pre-payment penalties

    Client just emailed with this question. If he refinances his mortgage, can he deduct the pre-payment penalties on his tax return?

    I am not sure what pre payment penalties would be considered. Any one have any thoughts?

    Linda F
    Tags: None
    • Roland Slugg
      Senior Member
      • Aug 2006
      • 1860
      #2
      Yes

      A prepayment penalty is deductible as interest, if it otherwise qualifies as deductible interest ... i.e. not over the qualified limits, etc. The lender should include the prepayment penalty amount in Box 1 of F-1098, as per the instructions to that form.
      Roland Slugg
      "I do what I can."

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        • oceanlovin'ea
          Senior Member
          • Jun 2005
          • 2682
          #3
          Thanks

          Roland. You are a great help on this board.Glad you are around.

          Linda F

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