How do enter HUD statement closing costs for home purchased in cash?

[redfooted520]

Since payment was in cash, there is no lender or 1098.

[DianeW777]

It depends on what you are using the home for. 

There would be amounts for real estate taxes for the portion of the year you owned the home which can be used for itemized deductions.  The only other item for the tax return would be mortgage interest which you do not have.

All other closing costs would be added to the cost basis of the home to reduce a future sale or as part of the original cost should you use it for a rental property.  This would then be a depreciable asset that would require the purchase price and certain closing costs such as title fees, commission, etc.

If you are using the home for reasons other than your living in it as your main home, please provide more details here and we can help.

[redfooted520]

I was of the understanding that prorations, title charges, recording fees, etc were deductible as "closing costs" for a cash purchase of primary residence. 

[redfooted520]

Is that not the case?

[xmasbaby0 · Accepted solution]

Sorry---no.   Those fees are not deductible.   Only mortgage interest, property tax, and loan origination points.  You do not have two of those.

And....they would not make any difference.  You have to have enough itemized deductions to exceed your standard deduction or an itemized deduction has no effect.

It is very hard for a lot of people to use itemized deductions now that the standard deduction is so much higher.  Your home ownership may not have any effect on your tax due or refund, especially if you purchased the house late in the year.  

Standard Deduction

Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach.  The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes. 

2023 STANDARD DEDUCTION AMOUNTS

SINGLE $13,850  (65 or older/legally blind + $1850)

MARRIED FILING SEPARATELY $13,850  (65 or older/legally blind + $1500)

MARRIED FILING JOINTLY $27,700  (65+/legally blind) )  + $1500 per spouse

HEAD OF HOUSEHOLD  $20,800 (65 or older/blind)  + $1850)

[Opus 17]

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@redfooted520 wrote:

I was of the understanding that prorations, title charges, recording fees, etc were deductible as "closing costs" for a cash purchase of primary residence. 

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No.  None of those costs are tax deductions.  Some of them count as costs that increase your purchase price (your cost basis) and may reduce your capital gains when you sell.  Those costs are listed in publication 523.

https://www.irs.gov/forms-pubs/about-publication-523

If you bought the home for cash, the only cost that is tax deductible is property taxes.  That will be reflected as an adjustment on your closing statement, and you can deduct the amount of taxes that can be allocated to your ownership period as if you paid them directly, even if you gave an adjustment to the seller.  For example, suppose the property taxes are due on Feb 15 for the calendar year and you bought the property in July.  The seller paid the taxes for the whole year up front, and you gave the seller an adjustment credit for the number of days that you would own the home that the seller previously paid for.  You can take that adjustment as property taxes you paid.