REFI and points expenses and TAX advnatages

Hi All,

We're trying to REFI our mortgage and wondering about REFI costs and tax deductibles/benefits/advantages etc.

Would like to find out answers to the following questions from the experts

1.Lets say if we pay $$$ towards REFI i.e.,App Fee/Admin Fee/Closing cost/Escrow fee/Title insurance/Title Fees/Notary and what so ever fees etc.

Does 100% of REFI costs are tax deductible or not?At the end of day lets say we paid 3K(example amount as I'm not sure of FINAL cost yet)

for REFI can we deduct entrire 3K when we file taxes next year?

2.We are considering to pay for points as well to bring down the rate of interest.Does 100% points fees is tax deductible or not?

Of course our tax bracket determines that.May be I need to talk to a tax guy etc..But in general 9 out of 10 cases how does paying for points work?

Appreciate your thoughts on this.Have a nice day...

Soa

Not all the fees will be tax deductible. Its only the Origination fee and points cost which can be considered while you talk about tax rebate.

Hope this answers your question.

Thank you for the quick and detailed explanation

One more question. Does the paying 1% point for REFI is deductible 2009 tax year or life of the  loan(30 years fixed)?

Check with your tax professional.

Is it is tax rebate only if it is charged under origination section on the HUD 1 settelment section.

Soa

You get tax rebate on origination fee only for the current yr.

summer.surana:

You get tax rebate on origination fee only for the current yr.

Refi points 

While points-deductibility definitely is a tax-saving option buyers should explore any time they get a loan to buy another home, a taxpayer who simply refinances also might be eligible for this tax break.

In most refinancing cases, a homeowner must deduct any loan points over the life of the loan. But if part of the refinanced mortgage proceeds are used to improve the main home and tests 1 through 6 listed previously are met, the portion of points attributable to the improvement can be deducted in the year paid. Any points related to the refinanced existing balance, however, are not eligible for immediate tax-deduction purposes; they still must be amortized over the life of the refinanced loan. These points-deductibility rules also apply to home equity loans or home equity lines of credit.

If, however, you use your refi to get some extra cash or take out a home equity loan or line of credit and then use the money for something else, such as paying college costs or buying a car, you still can deduct the points, but not all at once. The points deductions must be parceled out over the equity loan's term.

Summer, again before you go spewing out advice, you should really do some research. Many of your posts are very inaccurate!!!

SOA- consult your tax accountany.  We as mortgage professionals are not allowed to offer tax advice.  Generally speaking points are deductible as you know, how they are deducted is completely dependant on your specific transaction. 

Ryan

I guess you need to understand and read the actual question Soa had about tax rebate and closing cost before pinpointing anyone out here.

Hope you read all the posts in a thread before commenting on anyone.

Summer,

I just did, perhaps you yourself should take the liberty to re-read the thread. Tell me exactly what a tax rebate is, maybe i'm confused? I don't believe anything was ever mentioned about tax rebates, i did however read "We're trying to REFI our mortgage and wondering about REFI costs and tax deductibles/benefits/advantages etc." and "2.We are considering to pay for points as well to bring down the rate of interest.Does 100% points fees is tax deductible or not?" and you said "You get tax rebate on origination fee only for the current yr."---sorry not true

Hi All,

Thanks alot for your time and help.

Apologies if I didn't frame my question(s) properly.Its my bad.

We are simply doing a REFI of the existing first mortgage balance of CA jumbo loan balance of  $527K to a new and lower rate 30 years fixed loan and would like to pay closing and points(if any).

Looks like the cost associated with points will be spread through life of loan.My understanding was I'll get the FULL/100% tax benefit next year which is NOT the case. I do my taxes on my own with the help of TurboTax and my income various as I'll work on hourly basis.So I don't have any  dedicated tax consultant to seek the advice but I was curious to learn in general how paying for points work in case of a simple REFI scenario.

Once again I thank all the mortgage professionals and the experts for your thoughts on this.

Have a nice day.

s

IRS has a pretty good website---I'd trust that.  (even though a lot of IRS agents aren't schooled in it either!)

Its official...

Generally, taxpayers who itemize may deduct the “points” paid to obtain a home mortgage as interest. They may deduct the points on the mortgage related to a home purchase or a home improvement in the year paid, but for other loans – such as a refinanced mortgage – they must deduct the points over the life of the loan.

http://www.irs.gov/newsroom/article/0,,id=117607,00.html

http://www.irs.gov/pub/irs-pdf/p936.pdf

Once above pdf opens search for "Refinance" or "points". IRS has given couple of examples too.

Thanks all again for expert advice. No wonder why more ppl like me are visiting this awesome web site and forums. keep up the good work.

Have a nice evening.