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

Does it matter if you pay the points out of pocket vs rolling them into the loan? And is there a limit to how much you can deduct for points in a given year?

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.

Does it actually work with the standard loan estimate forms? My closing is in 3 weeks and I just got those preliminary forms but not the final closing disclosure yet.

Sounds kinda gimmicky tbh. How accurate is it? Like wouldn't you still need a CPA to confirm everything?

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.

Wait is this legit? How does it actually work? The IRS phone system is notorious for being impossible to get through.

Sounds like a scam to me. How could a service possibly bypass the IRS queue system? If this were real everyone would be using it and it would stop working immediately.

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.

Thanks! Would it be too late to ask about this if we've already signed all the preliminary paperwork? Closing is in 3 weeks but I don't want to mess anything up at this point.

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.

This! My lender did the exact same thing. One line item called "origination fee" but it was actually multiple different charges. Had to ask for the itemized breakdown.

This is super helpful! I didn't know about the specific line numbers to look for on the closing documents. When you say "customary in your area" - is there a way to research what's typical for mortgage points in my region, or is that something the lender should already know and confirm for me? I want to make sure I'm prepared with the right questions when I talk to them.

Great question! Your lender should definitely know what's customary in your area since they work with local regulations and market standards daily. However, you can also do some research yourself by checking with local real estate agents or mortgage brokers to get a sense of typical point ranges. Generally speaking, points typically range from 0.5% to 2% of the loan amount, but this varies significantly by region and market conditions. When you ask your lender, phrase it like: "Can you confirm that this 1.25% fee meets the IRS requirement of being customary for this area?" They should be able to provide documentation or at least a clear explanation of how your fee compares to local standards. Also worth noting - the IRS also requires that the points not be excessive compared to what's generally charged locally, so getting that confirmation from your lender is really important for your deduction eligibility.

Your lender should definitely know what's customary for your area, but you can also do some research yourself! Check with local real estate agents or mortgage brokers - they'll know the typical range for points in your market. Generally, points range from 0.5% to 2% of the loan amount, with 1-1.5% being pretty common in most areas. You can also look at online mortgage rate comparison sites like Bankrate or LendingTree - they often show typical point costs for different regions. The key thing is that your 1.25% needs to be reasonable compared to what other lenders in your area charge for similar loans. If it's way above the norm, the IRS might question whether it's truly points or just inflated fees.

Your lender should definitely know what's customary in your area since they originate loans there regularly, but you can also do some research yourself. Check with local real estate agents or mortgage brokers to get a sense of typical point ranges. Most areas see anywhere from 0.5% to 2% as normal, but it varies by market. You can also look at online mortgage rate comparison sites - many will show average points being charged in your zip code or metro area. When you ask your lender, frame it as "What's the typical range for points in this area?" rather than just accepting their word that yours are reasonable.

Great question! For the "customary in your area" requirement, you can research typical point ranges by checking with local mortgage brokers or looking at recent rate sheets from multiple lenders in your region. Generally, points between 0.5% to 2% of the loan amount are considered customary in most areas, but it can vary by market. Your lender should definitely be able to confirm this for you though - they deal with local standards daily and know what's typical for your area. When you ask them, phrase it like: "Can you confirm that this 1.25% fee meets the IRS requirement of being customary for our local market?" They should be able to give you a straight yes/no answer and provide context about local norms if needed.

Your lender should definitely know what's customary for your area, but you can also do some research yourself! Check with local real estate agents or mortgage brokers - they usually know the typical range for points in your market. You can also look at recent sales data on sites like Zillow or Redfin to see what other buyers have paid. Generally, points ranging from 0.5% to 2% of the loan amount are considered reasonable in most markets, but this can vary significantly based on your location and current market conditions. The key thing is that the IRS wants to make sure you're not paying excessive fees just to claim a bigger deduction - so as long as your 1.25% falls within the normal range for your area, you should be fine. When you talk to your lender, ask them specifically: "Is this origination fee considered customary for loans in this area, and do you classify it as points (prepaid interest) or as a service fee?" That should get you the clear answer you need for tax purposes.

Your lender should definitely know what's customary for points in your area since they deal with this all the time. You can also check with other local lenders or mortgage brokers to get a sense of typical point ranges - usually anywhere from 0.5% to 2% is considered normal, but it varies by region and market conditions. The IRS doesn't publish specific regional guidelines, so your lender's confirmation that the amount is "reasonable and customary" for your area is usually sufficient. Just make sure they can document that it's actually prepaid interest (points) rather than a service fee. If they seem unsure or evasive about the distinction, that might be a red flag that it's more of a service charge.

Great question! Your lender should definitely know what's customary for your area since they deal with loans there regularly. You can also check with local real estate agents or mortgage brokers to get a sense of typical point ranges. In most markets, anywhere from 0.5% to 2% is pretty standard for discount points, but it varies by region and market conditions. When you ask your lender, a good question is: "What's the typical range for discount points in this area, and how does my 1.25% fee compare?" They should be able to give you specifics about local practices. The IRS isn't super strict about this requirement - they mainly want to make sure you're not paying way above market rates that might indicate the fee is actually for something else.

Good question! Your lender should definitely know what's customary in your area since they handle mortgages there regularly. You can also check with other local lenders to see what they typically charge for points - most will quote you their standard rates over the phone. Real estate agents in your area are another good resource since they see these transactions all the time. Generally speaking, points typically range from 0.5% to 2% of the loan amount depending on the market, but what matters for tax purposes is that your specific amount isn't unusually high for your region. If your lender says 1.25% is normal for your area and market conditions, that should satisfy the IRS requirement.

Your lender should definitely know what's customary in your area since they handle mortgages there regularly, but you can also check with other local lenders or mortgage brokers to get a sense of typical point ranges. In most areas, points typically range from 0.5% to 2% of the loan amount, so your 1.25% would generally fall within normal ranges. The "customary" requirement is more about making sure you're not paying an unusually high amount that might indicate the fee is really for services rather than true prepaid interest. If your lender can confirm that similar loans in your area commonly have point charges in that range, you should be good on that test. The key is getting them to specifically state whether your fee qualifies as "discount points" or "prepaid interest" versus a service fee.

Your lender should definitely know what's customary for your area since they deal with this all the time, but you can also do some research yourself. Check with local real estate agents or mortgage brokers to get a sense of typical point ranges in your market. Generally, points range from 0.5% to 2% of the loan amount, but this varies by region and market conditions. You can also look at recent comparable sales data or ask your real estate agent what they typically see. The key is that the amount should be reasonable and not excessive compared to local standards. When you ask your lender, phrase it as "What's the typical range for discount points in this area?" and "How does my 1.25% compare to your other recent loans?" This puts them in a position to give you specific, helpful information rather than vague answers.

Your lender should definitely know what's customary in your area since they handle loans in your region regularly. However, if you want to do your own research, you can check with local real estate agents or mortgage brokers to get a sense of typical point ranges. Generally, points between 0.5% to 3% of the loan amount are considered reasonable, but it really depends on your local market. The key thing is that the IRS looks at whether the amount is "reasonable" compared to what other lenders in your area charge for similar loans. Your lender should be able to provide documentation showing that your 1.25% falls within normal ranges for your market if questioned. Don't hesitate to ask them directly: "Can you confirm this fee amount is customary for loans in this area and provide documentation if needed for tax purposes?

Your lender should definitely know what's customary for your area since they deal with loans there regularly, but you can also do some research on your own. Check with local real estate agents or mortgage brokers to get a sense of typical point ranges. Most areas see anywhere from 0.5% to 2% as reasonable, but it varies by market. You can also look at online mortgage rate comparison sites that show average points for your area. When you ask your lender, phrase it like "Can you confirm this fee meets the IRS requirement of being customary for this area?" - that way they know you're aware of the tax implications and will give you a more detailed answer.

Your lender should definitely be able to tell you what's customary in your area since they originate loans there regularly. But if you want to do your own research, you can check with local real estate agents or mortgage brokers to get a sense of typical point ranges. Generally, 0.5% to 2% of the loan amount is common, but it varies by region and market conditions. The "customary" test is really about making sure you're not paying way above market rates just to create a tax deduction. As long as your 1.25% is within the normal range for your area and loan type, that part of the IRS test should be satisfied. Your lender will know this better than anyone since they see the local market daily.

Your lender should definitely know what's customary in your area since they work with mortgages there regularly, but you can also do some research yourself. Check with local real estate agents, mortgage brokers, or even online forums for your city/region to see what typical point ranges are. Generally, 0.5% to 2% of the loan amount is common for discount points, but it varies by location and market conditions. When you ask your lender, phrase it like: "What's the typical range for discount points in this area, and does my 1.25% fee fall within that range?" They should be able to give you a clear answer since exceeding customary amounts could disqualify the deduction. Also ask them to show you exactly how they calculated the fee - legitimate points should be a straightforward percentage calculation.

Your lender should definitely know what's customary for your area since they deal with these transactions daily, but you can also research this yourself. Check with local real estate agents, mortgage brokers, or even look at recent home sales data in your area through sites like Zillow or Realtor.com to see typical point ranges. Generally, 0.5% to 2% is common for discount points, but it varies by region and market conditions. You can also ask your lender to provide documentation showing that the points charged are within the normal range for your area - they should be able to back this up with market data if the points are legitimate and deductible.

Your lender should definitely know what's customary for your area since they originate loans there regularly, but you can also do some research on your own! Check with local real estate agents or mortgage brokers about typical point ranges in your market - they usually know the going rates. You can also look at online mortgage rate comparison sites that show average points for your region. Generally, anywhere from 0.5% to 2% of the loan amount is considered reasonable for most areas, but it varies by location and market conditions. When you ask your lender, phrase it as "Is this fee within the typical range for points in this area?" - they should be able to give you a clear yes/no answer.

Your lender should definitely know what's customary for your area since they process loans there regularly, but you can also check with other local lenders or mortgage brokers for comparison. Generally, points ranging from 0.5% to 2% of the loan amount are considered typical, but it varies by region and market conditions. The lender is required to provide you with a Loan Estimate form within 3 business days of your application that shows all fees, and they should be able to explain whether each fee meets the IRS criteria for deductible points. Don't hesitate to ask them directly: "Does this fee qualify as deductible points under IRS guidelines?" - they deal with this question all the time and should give you a straight answer.

Your lender should definitely know what's customary in your area since they deal with local mortgages all the time. But you can also check with other local lenders or mortgage brokers to get a sense of typical point rates - most will quote you ranges over the phone. Generally, points between 0.5% to 2% of the loan amount are pretty standard, but it varies by region and market conditions. You can also ask your lender something like "Is this 1.25% fee within the normal range for points in this area?" They should be able to give you a straight answer. If they seem evasive or say they don't know, that might be a red flag that it's actually a service fee rather than true points.