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Date posted: August 24, 2007

Can the origination fee on the refinanced loan be used as an itemized deduction?

We refinanced our home this year to get a better mortgage rate. As usual, a 1% origination fee was charged on the closing statement. Can the origination fee on the refinanced loan be used as an itemized deduction?

— Submitted by Judith

The only settlement or closing costs you can deduct are home mortgage interest, certain points, and certain real estate taxes. You deduct them in the year you buy your home if you itemize your deductions. You can add certain other settlement or closing costs to the basis of your home. There are some settlement or closing costs that you cannot deduct or add to the basis.

You can include in your basis the settlement fees and closing costs that are for buying your home. You cannot include in your basis the fees and costs that are for getting a mortgage loan. A fee is for buying the home if you would have had to pay it, even if you paid cash for the home.