DEAR BOB: Recently you answered a question about mortgage loan fees. You said loan fees on home mortgages were tax deductible as prepaid interest. I phoned the local IRS office and they are not aware of this. Please clarify. Ronald M., Arlington.
DEAR RONALD: The 1976 Tax Reform Law wiped out tax deductions for prepaid interest. This includes mortgage loan fees charged by lenders for granting a mortgage. They are no longer immediately tax deductible as interest in the year paid. Now such fees must be amortized over the life of the mortgage. For example, a $1,000 loan fee paid to get a 30-year mortgage gives only $33.33 annual deduction for 30 years.
However, there is an exception for loan fees paid to get a mortgage on your personal residence. Such fees are fully tax deductible as interest in the year paid. But if you prepay the interest on your home mortgage (other than a loan fee), it is not tax deductible until the year it is earned by the lender.
The report "How to Avoid Tax When Selling Your Residence" is available for 25 cents in coin plus a self-addressed STAMPED envelope sent to Robert J. Bruss, P.O. Box 6710, San Franciso, Calif. 94101.