A major financial benefit is now available for military homebuyers. Starting this year, Veterans, active-duty service members, and surviving spouses who use a VA-backed home loan may be eligible to deduct their VA funding fee on their taxes — potentially saving thousands when purchasing a home.

This change provides additional financial relief and makes homeownership even more accessible through the VA home loan program.

What Is the VA Funding Fee?

The VA funding fee is a one-time payment required for most borrowers using a VA-backed home loan through the U.S. Department of Veterans Affairs.

This fee helps support the VA Home Loan Program so it can continue offering valuable benefits like:

• No required down payment (in most cases)
• No monthly mortgage insurance
• Competitive interest rates
• Flexible credit requirements

The funding fee is typically paid at closing and can either:

• Be rolled into the loan amount, or
• Be paid upfront at closing.

Who Is Exempt From the Funding Fee?

Some borrowers are exempt from paying the VA funding fee, including:

• Veterans receiving VA compensation for service-connected disabilities
• Purple Heart recipients still serving on active duty
• Certain surviving spouses
• Other eligible borrowers determined by the VA

These exemptions can significantly reduce upfront homebuying costs.

How Much Is the VA Funding Fee?

The fee varies based on several factors, including:

• Loan type
• Loan amount
• Down payment amount
• Whether it’s the borrower’s first time using a VA loan

Typically, the funding fee ranges from 0.5% to 3.3% of the loan amount.

What’s New: Funding Fees Are Now Tax-Deductible

Eligible borrowers can now deduct the VA funding fee on their taxes when purchasing a home using a VA-guaranteed loan. This new tax benefit may help reduce overall homebuying costs and increase savings for military families.

According to Patrick Zondervan, Executive Director of VA’s Loan Guaranty Service, the change helps ensure eligible borrowers can potentially keep more money in their pockets while benefiting from the VA home loan program.

This update comes as the VA recently reached a major milestone — issuing its 29 millionth VA-guaranteed home loan to Veterans, service members, and surviving spouses.

Important Disclaimer

This information is for educational purposes only and should not be considered tax, legal, or financial advice. Military homebuyers should consult a qualified tax professional or legal advisor to understand how this benefit applies to their individual situation. 

Article from VA News highlighting this new update

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