The amount of $1,465 could be appraisals, legal fees, prepaid real estate, mortgage interests, and other fees associated in getting the home loan. Of the items mentioned above, prepaid property taxes and mortgage interests are the only fees that are deductible. You can check back on the closing statement and verify the description of the closing costs.
Some closing costs are deductible such as loan origination fees or discounts. A mortgage origination fee is an upfront fee charged by a lender to process a new loan application. Tax-deductible closing costs can be written off in three ways:
- Deduct them in the year they are paid.
- Deduct them over the life of the loan.
- Add them to your basis when you sell the home.
The following are non-deductible closing costs:
- Homeowners insurance premiums
- Monthly principal payments
- Utility costs (gas, water, electric)
- Money lost on a sale that fell through
- Home appraisal fees.
- Notary fees
- Document preparation fees
