Hello,
I am in the process of purchasing a house ("the buyer"). During the process, the seller has agreed to "compensate the buyer" an amount "by allocating funds toward the buyer's closing costs at settlement". My questions:
1. Is it the same as Closing Costs Credit?
2. Is it tax deductible for me as the buyer?
3. (if the answer to 2 is yes) What type of forms/documents should I need to obtain, and from who (the seller or the lender) so then I can deduct it from my AGI.
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No, the "credit" just changes the amount you have paid for your home. If this is your personal residence, not a rental property, it doesn't affect your tax return until you sell the home.
Yes, these are closing costs credits. They aren't tax deductible for you.
This credit will reduce the cost basis of your home.
Hi,
Thank you for your response.
I am also wondering if I will be paying any taxes on that credit as income or something.
No, the "credit" just changes the amount you have paid for your home. If this is your personal residence, not a rental property, it doesn't affect your tax return until you sell the home.
Question for @JulieS and @MinhT1: If the seller supplied funds can be applied to points or property taxes charged at closing, can the buyer deduct the points and property taxes on schedule A in accordance with pub 530? The seller still has to add these funds to his selling coasts and the buyer still has to reduced his basis in the home.
Yes, the buyer uses these expenses they are liable for.
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