There are some
closing costs that you can deduct but most of the closing costs are not deductible.
Deductible closing costs include:
- interest paid at the time of
purchase (the charge at closing would normally be done for interest up to
the date of first payment.);
- real estate taxes charged to you;
- points (sometimes called
origination fees and expressed as a percentage of the amount
borrowed.) [On a refinance they need to be amortized
over the life of the loan or 84 months, whichever is less, unless the
points were used to improve your main home.]; and
- private mortgage insurance costs
but, if prepaid, only the amount attributable to this year based on an 84
month amortization.
To enter these items
in TurboTax, please follow these steps:
- Click on Federal Taxes >
Deductions & Credits [In TT Self-Employed:
Personal > Deductions & Credits > I'll choose what
I work on].
- Scroll to the Your Home section
and click on the Start/Revisit box next to Mortgage
Interest, Refinancing, and Insurance. [See Screenshot #1,
below.]
-
After finishing you will be
brought back to the Deductions screen, where you can
then click Start/Revisit next to Property Taxes. [Screenshot
#2]
Most
of the closing costs on a home purchase
or sale, are not deductible
- added to the cost (basis) (when buying
the home); or
- subtracted from the sales price of
the home (when selling)
This will reduce any
gain when you sell the house down the road.
Examples of closing
costs added to the basis of the house are: title fees, real estate
commissions, appraisal costs, home inspections, documentary stamps, credit
report costs, costs of an abstract, transfer taxes, flood certificate, attorney
fees, etc.
For details, see IRS Pub. 530 - Tax Information for Homeowners
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