VA funding fee and tax deductions

1 Reply

I have run into an issue with my taxes. I bought my owner occupied 4 plex in OCT 2014. Therefore, the VA Funding fee (around 7000$) is all tax deductible for the tax year of 2014. The "tax professional" at H&R Block says that the funding fee counts as a business expense and should therefore go on my Schedule E for taxes. My Mortgage provider says that it's a personal expense and should go in Schedule A, he also said that he's never seen it put in schedule E before.

This is problematic because I am trying to buy a second house, and if my current property shows an extra 7000 dollars in losses (by putting the funding fee on the schedule E), the mortgage provider might not underwrite the loan.

Does anyone have any experience with taxes and VA loan funding fees on owner occupied properties?

The funding fee is easily documented as a one-time expense that will not recur annually. You can make your mortgage guy and your tax gal both happy.

  • Keep your final HUD-1.
  • Have your CPA put it on line 19 of your Schedule E, and have her call it "VA Funding Fee."
  • Point out how the number on the final HUD-1 magically lines up exactly with line 19 on Schedule E to your mortgage guy.

(People reading this that are thinking of buying properties today should know that HUD-1 is gone, now we have CDs.)

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