Are closing cost paid by lender taxable

[rinowino]

Question:  Are closing costs paid by lender taxable?

Closing costs are a fairly broad category.  First, I'm assuming this transaction is for the purchase of a personal residence.  The reimbursement would not be taxable.  I would treat it as a reduction of the purchase price of the home.

[bratleys]

thank you.  it is for a refinance of a residence.  I received a 1099 Misc from the mortgage company is why I asked.  I have never received one before so I am not sure if it is taxable or not.

[rinowino]

Hi, I'm a little surprised the mortgage company issued a 1099. A 1099 will require inclusion in income. I'm trying to fathom why it is deemed income. It is equivalent to your getting a discount on your principal balance today in exchange for paying more interest over the life of the loan. You might challenge the company or get a professional opinion. I suspect they have done their homework and are correct. Keep me posted!
Regards,

[bratleys]

Thank you for the help!