Can I claim earnest money that I put down for my house?

[xmasbaby0]

No, earnest money or down payments are not deductible.

Buying a home is not a guarantee of a big refund.  Your deductions for homeownership combined with your other deductions (if any) must exceed your standard deduction to change your tax due or refund. If you purchased your home late in the year, you do not even have a full year of home ownership deductions.

 Go to Federal> Deductions and Credits> Your Home to enter mortgage interest, property taxes, private mortgage insurance and loan origination fees (“points”) that you paid in 2016.  You should have a 1098 from your mortgage lender that shows this information.

Your closing costs on your new home are not deductible except for prepaid interest, prepaid property tax or loan origination fees.  There are no deductions for appraisal, inspections, settlement fees. etc.

Your down payment is not deductible.

Your homeowners insurance for fire, hazard, flood, etc. is not deductible for your own home.

Home improvements, repairs, maintenance, etc. for your own home are not deductible.

[transcendancestu]

@xmasbaby0 

How does this apply to commercial real estate purchase for my business? 

Do I have to capitalize the following costs?

• Inspections / Appraisals / Environmental Report Fees
• Loan fees: budget review fee, application fee, commitment deposit
• Architectural services
• Life Insurance (required by lender)
• Legal fees associated with negotiation of purchase

It would be much better for me to be able to expense the above costs and capitalize the actual building purchase (loan + downpayment + closing costs).  This is my first time going through this process with a new building - thanks for your help!

[SusanY1]

You will not deduct the earnest money, down payment, etc. as  separate expenses. All of these, as well as the principal amount of the loan are used to form your basis in the property which is then expensed annually through depreciation expense. 

When you enter the asset into TurboTax it will walk you through all of the steps to determine the basis which include the closing costs and fees associated with the initial purchase. 

Of the items that you listed above, only the life insurance stands out to me as an item which may be better listed as a current expense rather than added to the basis (the exception to this would be if you purchased a single-premium insurance policy at the time of closing) as it will continue to be an ongoing expense. 

@transcendancestu

[sk19801980]

I have slightly different situation. I lost my 3% money due back out on real estate deal. Can i deduct that 3% from earning? Back out was due to job loss

[TomD8]

@sk19801980 

Per IRS Publication 530, you cannot deduct forfeited deposits, down payments, or deposits on a failed home purchase.

Publication 530 (2021), Tax Information for Homeowners | Internal Revenue Service (irs.gov)

[Kaluk]

Hi, I wonder would the answer be different if I own an LLC, lost my deposit on a 1031 roll over deal.  Where can I report the loss? I'm considering to net it with boot received on line 15 form 8824? or schedule D of form 1065 but not sure on what line of Sched. D

Any help is appreciated