Tax Law (Questions About Taxes)/FHA refinance

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Question
Hi John

I hope you might know about how to itemize expenses from an FHA refinance.

I took out a conventional loan on my house (primary residence) that we got in 2006 but then we refinanced into an FHA loan in 2010 and then we refinanced again into a new FHA loan with the same lender last year, 2012. On my HUD-1 statement for the 2012 loan, I paid an origination charge of $3377 for the refinance (line 801), but then I also got a credit for the specific interest rate chosen of $4,112 (line 802). Does the fact that I received a credit on line 802 for more than the amount of the origination charge mean that the origination charge is not tax deductible?

We also received a UFMIP credit of $480 (line 205), which I understand is a partial refund of the MIP fee from our previous (2010) loan. How do I need to work that credit into my calculations? I was trying to still use the unused deductions from the 2010 loan, which I read has to be spread over the life of the new loan.

I appreciate any assistance you can provide. Thank you.

Chris

Answer
Chris:

You will be able to deduct from your income tax return what you actually paid out of your pocket in interest and fees.  If at one part in the loan they charge you a fee and at a later point give you a credit greater than your charge then that charge would not be deductible.  The bottom line becomes what did you actually pay in cash or check on interests and deductible fee's.

John

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John L. Tidwell

Expertise

Unemployment tax law both state and federal; determination of employer employee relationship; the usual 20 commonlaw factors for making that determination; and what makes me a liable employer.

Experience

Over 20 years of field audit experience with a state agency

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Degree in Accounting from Falls Business College

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