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What closing costs are tax deductible on a primary residence?

We purchased our primary residence this past year (June 2013) via FHA and was wondering what closing costs  from the HUD-1, page 2, document are tax deductible. Correct me if I'm mistaken but from what I've researched "Adjusted Origination" charges (line item 803) and Daily Interest Charges (line item 901) are deductible and "Appraisal" fees (line item 804), "Credit Report" fees (line item 805) and "Flood Certification" charges (line item 807) are NOT. The main one I am questioning is line item 902, "Mortgage Insurance premium to US Dept of HUD", under the "Items Required by Lender to Be Paid in Advance" section. I've seen advice to take that amount, divide it by 84 and multiply it by the number of mortgage payments paid during the course of the year. Is that correct or is the total amount paid deductible in this year's taxes since the cost was incurred this year? Thanks.
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Accepted Solutions
Alumni bwa
Alumni

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."


View solution in original post

1 Reply
Alumni bwa
Alumni

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."


View solution in original post