No the penalty is not deductible on a home loan. Only the interest that is paid. The penalty is considered as a late payment not interest.
Good luck The initial answer to this question is incorrect. Prepayment penalties are sometimes deductible if the payment is made out of pocket as opposed to being rolled over into the new loan. It is not ever considered to be a late payment.It is considred interest.
Even if the amount is rolled over into a new loan, you may be able to pro rate the deduction over the term of the loan. The bottom line is that depending on your particular circumstances, the prepayment penalty might be deductible PLEASE consult a tax consultant for the most up to date 2008 tax information. And also PLEASE remember that on the internet, never ever take the advice of one so-called expert.
Check. Check and double check everything Here is the info directly from the IRS irs.gov/publications/p936/ar02.html#d0e770 Mortgage prepayment penalty If you pay off your home mortgage early, you may have to pay a penalty. You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan.
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