[net.taxes] "Points" Deductible?

ted@hp-pcd.UUCP (ted) (02/26/86)

> This question was bashed around pretty fiercely a few months ago; I'd like
> to contribute what I learned yesterday during a conversation with your
> friend and mine, the IRS.  
>
>      1.  "Points" are prepaid interest.            
>      2.  Prepaid interest must be deducted over the period of the loan,
>      3.  UNLESS the loan is used to purchase or improve your principal
>          residence, in which case you deduct the points in the year you
>          paid them.
> 
> Also note that "points", or whatever it's called ("loan origination fee",
> in my case), must be solely for the use of money.  It must not include
> legal fees, recording costs, etc., which are instead added to the cost
> of the house when you sell.  
> 
> And as someone has previously pointed out, the practice of charging 
> points must be customary in your area, and the number of points charged
> mustn't exceed what is customary in your area.  (Incidentally, in 
> Massachusetts it is customary for the BUYER to pay the points;  it struck
> me as being odd that in some parts of the country the SELLER pays them.
> Hmmm, maybe we can get more sellers in Massachusetts to do the same?)

I have a few questions that come out of this note.  First, are 'points' on
all loans for a principle residence deductable?  I have an FHA loan in
which I paid points on.  Are these points deductable?  I have heard that any
points paid on VA loans and FHA loans are not deductable. Is this true?
Second, how do you find out what the customary 'points' in your area are?
Finally, since I have a FHA loan I also had to pay a loan fee, credit report
fee, and an appraisal fee.  Are these deductable?

Ted Ransom
Hewlett-Packard
Corvallis Oregon