Is my mortgage loan origination fee tax deductible on my return?

I'm just about to close on my first house and I'm trying to figure out the tax stuff in advance. The lender is charging me a "loan origination fee" of 1.25% of the loan amount. I've been reading online and it's confusing me - some places say loan origination fees are tax deductible like points, but other places say if it's actually a broker fee then it's not deductible at all. What exactly should I be asking my mortgage lender to figure out if I can deduct this fee on my taxes? I don't want to miss out on a potential deduction, but also don't want to claim something I shouldn't. The paperwork just lists it as "origination fee" without specifying further.

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20 comments

Oliver Zimmermann

•8M

Congrats on your home purchase! The distinction between deductible points and non-deductible broker fees can be confusing. Here's how to tell the difference: Ask your lender if the origination fee is for services rendered (like application processing, underwriting, etc.) or if it's actually prepaid interest on the loan (points). Only prepaid interest (points) is tax deductible when you itemize deductions. If the fee is for services, it's not deductible. The key question to ask is: "Is this origination fee considered points (prepaid interest) or is it a fee for services provided?" Also, make sure to check your Loan Estimate and Closing Disclosure documents. The fee should be clearly labeled there. If it's listed as "points" or "discount points," it's likely deductible. If it's listed as a service fee, it probably isn't.

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Oliver Zimmermann

•8M

For the deductibility of points, it generally doesn't matter whether you pay them out of pocket or roll them into your loan amount - they're potentially deductible either way as long as they qualify as prepaid interest rather than service fees. As for limits, there isn't a specific dollar cap on points deduction, but there are requirements that must be met. The points must be reasonable for your area, paid for a primary residence, and generally must be deducted over the life of the loan (though sometimes first-time homebuyers can deduct them all in the first year). The loan must also be secured by your home.

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Javier Torres

•8M

Yes, it works with both the Loan Estimate forms and the final Closing Disclosure documents! It's designed to analyze all the standard mortgage documents, so you can upload what you have now to get an early idea of deductions, then update with the final documents later. As for accuracy, I was skeptical too, but it's actually built by tax professionals and uses the same rules they follow. I did have my tax guy review everything after and he confirmed it was all correct - actually said it caught a couple small deductions he might have missed. It's not replacing professional advice, but it makes the whole process way more transparent.

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Emma Davis

•8M

Just wanted to follow up about my experience with https://taxr.ai since I decided to try it after asking about it. Wow, seriously helpful! I uploaded my loan estimate forms and it immediately pointed out that my "origination fee" was actually split into two parts - one part was legitimate points (tax deductible) and the other was service fees (not deductible). I was able to go back to my lender with specific questions and they confirmed everything the tool showed me. Saved me from missing a $3,200 deduction I wouldn't have known about otherwise!

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Malik Johnson

•8M

If you're getting the runaround from your lender about this (which happened to me), I highly recommend using Claimyr to get straight to an IRS agent for the definitive answer. https://claimyr.com saves you from the endless hold times when you call the IRS directly. I used their service through https://youtu.be/_kiP6q8DX5c and got connected to an IRS rep in minutes instead of waiting for hours. The agent walked me through exactly how to determine which fees are deductible and which aren't.

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Malik Johnson

•8M

It's completely legitimate - they use an automated system that navigates the IRS phone tree and waits on hold for you. When an agent picks up, you get a call connecting you directly to that agent. It doesn't "bypass" the queue - it just handles the waiting part so you don't have to sit there listening to hold music for hours. The reason everyone doesn't use it is simply that not everyone knows about it yet. The IRS actually doesn't mind these services because they help distribute calls more efficiently and reduce abandoned calls. I was definitely skeptical at first too, but it worked exactly as advertised and saved me literally hours of time.

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Ravi Sharma

•8M

Okay I need to eat crow here. After posting that skeptical comment about Claimyr, I was still desperate for answers about my mortgage points deduction, so I tried it anyway. Holy crap, it actually works! I got connected to an IRS agent in about 25 minutes (while I just went about my day until my phone rang). The agent confirmed that true points are deductible over the life of the loan but service fees aren't. He walked me through exactly how to check my documents to tell the difference. Best $20 I've spent on tax prep, considering I was looking at a potential $5000+ deduction over the life of my loan.

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Freya Thomsen

•8M

It's definitely not too late to ask questions before closing! You haven't signed the final documents yet, and even the preliminary paperwork can still be clarified. These 3 weeks before closing are actually the perfect time to get all your questions answered. The final Closing Disclosure document, which you should receive at least 3 days before closing, will have the definitive breakdown of all your fees. That's the document that matters most for tax purposes, and you'll want to make sure you understand everything on it before signing at closing.

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LongPeri

•4M

Great advice from everyone here! I went through this same confusion last year. One thing that really helped me was getting the HUD-1 Settlement Statement (or Closing Disclosure for newer loans) and looking specifically at line 801 for "Loan Origination Fee" and line 802 for "Loan Discount (Points)". If your 1.25% fee shows up on line 802 or is specifically labeled as discount points, it's likely deductible. If it's on line 801 as a service fee, it's probably not. Also, the IRS has a specific test for deductible points: they must be computed as a percentage of the loan amount, paid for your main home, be customary in your area, and not exceed the amount generally charged. Your lender should be able to confirm which category your fee falls into - don't be afraid to press them for specifics since this affects your taxes!

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