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What closing costs are tax deductible on a primary residence?
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What closing costs are tax deductible on a primary residence?
Most expenses at closing on the purchase or refinance of a home are added to the cost of a new home. There are a few exceptions - the following would be deductible:
- 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 allocable to this year based on an 84 month amortization.
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. are not deductible, but are added to the cost of the property.
Mortgage interest, refinancing, property taxes and mortgage insurance are all under the Deductions and Credits tab for "Your Home."
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What closing costs are tax deductible on a primary residence?
Most expenses at closing on the purchase or refinance of a home are added to the cost of a new home. There are a few exceptions - the following would be deductible:
- 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 allocable to this year based on an 84 month amortization.
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. are not deductible, but are added to the cost of the property.
Mortgage interest, refinancing, property taxes and mortgage insurance are all under the Deductions and Credits tab for "Your Home."
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What closing costs are tax deductible on a primary residence?
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What closing costs are tax deductible on a primary residence?
Most closing costs on the purchase of a home are not deductible. The one exception is points you pay to reduce your interest rate and the real estate taxes you might pay upfront, and possibly property taxes that are paid at closing.
But keep good records. Many other settlement fees and closing costs for buying the property become additions to your basis in the property.
Please see this LendingTree article. Closing Costs That Are (and Aren’t) Tax-Deductible
Also see IRS publication 530 Publication 530 (2021), Tax Information for Homeowners - IRS
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