Closing Fees for Refinancing

Final fees for refinancing

The refinancing of a mortgage can save you money, but is not free. Refinancing taxes & acquisition costs If you are refinancing a home in order to obtain extra funding for construction or to take up lower interest rate, your new home loans are taxed in the same way as the initial homeowner. Therefore, you will not see any differences in the way you file your income taxes after refinancing, such as how you declare your interest deduction and the handling of your acquisition fees.

The refinancing of the initial home loan on your home allows you to require the same discounts that are available on your initial home loan. In order to consider your new home loan as a house purchase obligation, however, the IRS will require the new creditor to assume a lien on the home for which it is providing the home loan.

Like the acquisition fees you pay to obtain your prior mortgages, the IRS never allows you to deduct the acquisition fees. Instead, you activate these charges, that is, they raise your overall fiscal base. As a rule, it corresponds to the total of the sale prices, closing fees and the construction measures you have undertaken.

Selling the house, increasing your acquisition expenses base reduces the amount of your investment profits that you declare in your income statement. Non-deductible acquisition expenses typically comprise extracts from security fees, registration fees, transmission duties and the fees for engaging a lawyer to help with the closure.

They do not consider the points that your new creditor charged you for refinancing as non-deductible acquisition costs. Instead, the IRS treated the encumbrance as deductable interest on mortgages. You cannot, however, deduct all points for the year you are refinancing; you must deduct the same amount over the term of the credit.

In addition, you cannot make a deductible for points or interest on mortgages unless you individualize your deduction in Appendix A. Once you start paying back the new mortgages, you can still make your claims for interest on your mortgages on an annuity basis in the same way as you made your claims on your prior mortgages. If, however, your credit balances immediately before refinancing are greater than the amount due on your existing mortgages, you will not be able to subtract interest on the surplus credit balances.

However, the only exceptions are when you use the extra credit to fund construction. "Income taxes & acquisition costs for refinancing.

Mehr zum Thema