HUD - 1 Buyers Deductible Items

[Yardley CPA]

Client purchased new home in the first quarter of 2015.  I believe the following items are deductible on their return:

- HUD Line 801-803 - Loan Origination Fee.  (Where to deduct this?)

- Lines 100 - 600 - Real Estate Taxes  (I assume in the Real Estate section of Schedule A)

- Line 901 Interest  (In the Interest you Paid section of Schedule A)

Where would the Origination Fees be placed on Schedule A using the ATX program? 

 

Also, what can the seller deduct since we are on the topic.  Real Estate Taxes they paid?

 

Thank you.

 

[jklcpa]

1 hour ago, Yardley CPA said:

HUD Line 801-803 - Loan Origination Fee.  (Where to deduct this?)

Points, Sch A.  Check the HUD-1 for for any points or other deductible items paid outside of closing. Those may be noted to the left of the amount columns over in the line descriptions.

 

1 hour ago, Yardley CPA said:

Lines 100 - 600 - Real Estate Taxes  (I assume in the Real Estate section of Schedule A)

Yes

 

1 hour ago, Yardley CPA said:

- Line 901 Interest  (In the Interest you Paid section of Schedule A)

Yes, but this should be included in the 1098 from the mortgage company.  This amount should be interest from the settlement date up to the date when the first payment was due to the lender.  Do not include interest paid or real estate taxes paid into the escrow account.

[Abby Normal]

Origination fees have to be calculated as a % of the loan amount to qualify as points, but fortunately, I've never seen one that isn't.

Points

 

The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points.

A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. See Points paid by the seller , later.

General rule.   You cannot deduct the full amount of points in the year paid. They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage.

 

Exception.   You can deduct the full amount of points in the year paid if you meet all the following tests.

1. Your loan is secured by your main home. (Generally, your main home is the one you live in most of the time.)

2. Paying points is an established business practice in the area where the loan was made.

3. The points paid were not more than the points generally charged in that area.

4. You use the cash method of accounting. This means you report income in the year you receive it and deduct expenses in the year you pay them. Most individuals use this method.

5. The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes.

6. The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. The funds you provided are not required to have been applied to the points. They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. You cannot have borrowed these funds.

7. You use your loan to buy or build your main home.

8. The points were computed as a percentage of the principal amount of the mortgage.

9. The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. The points may be shown as paid from either your funds or the seller's.

https://www.irs.gov/publications/p530/ar02.html#en_US_2015_publink100011857

[jklcpa]

^ that is all correct. I didn't feel it was necessary to provide that level of information in the answer since I've never seen points that didn't meet the criteria either, and also because this was a home being purchased, not a refinance where the points would be amortized over the life of the loan, and not a rental property either.