For partial rental of one's primary residence, no. When you purchased the property as your primary residence, your closing costs were fully deductible in the year of purchase.
Also, escrow has nothing to do with this. Money placed in escrow is your money, and it remains your money until such time that an amount is distributed to pay an obligated debt, such as property taxes and insurance.
Only at the time the debt is paid, is anything potentially deductible. Note that for one's primary residence, insurance is not a deductible expense. However, when renting a percentage of your primary residence, an equal percentage of the insurance is deductible as a rental expense on SCH E.
To help clarify a bit more.
- Costs associated with acquisition of the loan were fully deductible in the year you purchased the property. An example includes loan application fees, points, etc. There is an option to amortize and deduct those costs over the life of the loan. While amortization is required for business property, it's optional for personal property.
- Costs associated with acquisition of the property are added to the cost basis of the property. Examples include title transfer fees paid at the courthouse to remove the seller's name from the deed and replace it with the buyer's name. These are sometimes referred to as transfer fees, document stamps, or transfer taxes. For personal property this is not figured into any cost basis "for you" by the program, since what you paid for personal property is irrelevant for tax purposes.
For rental property it will be figured. But when it comes to renting out a part of one's primary residence, the program to date has never handled it correctly; mainly because of a lack of clarity on what "you" need to pro-rate and what the program will prorate for you.
