The IRS Deductions Blog

Posts Tagged ‘tax deductible bank fees’

Question: Refinanced Mortgage and paid down some prior loan – what’s deductible?

I just refinanced. No Points, no PMI, just some typical fees, prepaid interest. But as a part of this refi, I had to pay down some of my prior loan balance down to the appropriate level so that my new mortgage didn’t exceed 80% of the assessed value. At closing, this amount was part of my closing costs, went to the title agent, who pays off my previous bank. My question – the title agent at closing said that the entire amount say $20K that I paid down my previous mortage by via closing is tax deductible as a cost of my new mortgage. And if I had paid the previous bank down directly prior to closing, it wouldn’t have been deductible. Is this deductible? I can’t see how it is. But she proceeded to swear it was, citing her H&R Block day job to bolster her credibility. Let me know what you think. Thanks. Brian

Answer: If you are paying down the mortgage it is not deductible. The mortgage interest would be. Most closing costs add to the basis of your home. I do not trust what realtors say.

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