VA funding fee and tax deductions

[Aaron Cappelli]

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?