Interest and Fees Deductible for 1st Time Home Buyer

[jmallard]

Hi everyone,

I used to have a checklist for this information, but it has been such a long time since I've had a client as a 1st time home buyer, I can't find my checklist.

Could someone give me guidance as to which of these items can my client deduct on Schedule A for these expenses in purchasing a home?

Origination Fee. . . . (I know, this is considered points and is deductible.)

Tax Service Fee . . .

Underwriting Fee . . .

Flood Certification Fee . . .

Prepaid Interest . . . (I know this is deductible)

Settlement/Closing Fee . . .

Admin . . .

Processing Fee . . .

Hazard Insurance . . .

County Taxes Paid to Escrow Account . . .

Thanks.

Jerry

[Robin]

Origination fee (points) can be deducted in its entireity for a new acquisition. The rest are basis adjustments. Also, look for real estate tax line items which can be deducted if paid (not held in escrow). You ignore the escrow items on the settlement sheet.

[jainen]

>>The rest are basis adjustments.<<

It really requires a more detailed analysis to do it properly. for example, the underwriting and processing fees are non-deductible costs of financing; they have nothing to do with the property basis. Other costs like the appraisal and flood certification are also lender requirements, although they may in some cases be an appropriate basis adjustment. The prepaid interest is deductible, but since it is already included on Form 1098 it should not be separately claimed. Hazard insurance is a non-deductible personal expense whether paid directly or into an escrow account. County taxes are deductible when paid directly, but could be a debit or credit depending on when the sale takes place.

[Tax Prep by Deb]

>>The rest are basis adjustments.<<

It really requires a more detailed analysis to do it properly. for example, the underwriting and processing fees are non-deductible costs of financing; they have nothing to do with the property basis. Other costs like the appraisal and flood certification are also lender requirements, although they may in some cases be an appropriate basis adjustment. The prepaid interest is deductible, but since it is already included on Form 1098 it should not be separately claimed. Hazard insurance is a non-deductible personal expense whether paid directly or into an escrow account. County taxes are deductible when paid directly, but could be a debit or credit depending on when the sale takes place.

Extremely well done and easy to understand!

I really do like straight forward, yet logical answers!

Deb!

[jmallard]

Thanks very much for all the replies.

Cleared that up for me in excellent fashion.

I like this community

Jerry

[TAXBILLY]

Here's one for investment property:

http://biztaxlaw.about.com/od/dealingwithr...losingcosts.htm

taxbilly