Mandy asks…
When purchasing a house, are the closing costs tax deductible?
Last year I bought a home. I know the interest and taxes may be deductible. A friend told me that the closing costs were also deductible. Is this true?
admin answers:
Points
Mortgage Interest
Property Taxes
those are the only thing on your closing statement that can be used to Itemize your deductions
Publication 530
http://www.irs.gov/publications/p530/index.html
Publication 936
http://www.irs.gov/publications/p936/index.html
Mark asks…
Are property taxes paid via escrow closing costs tax deductible on federal tax return?
admin answers:
It is a common misconception that you can write off all real estate taxes you paid when you purchase a house.
If you buy or sell real estate during the year, the deductible real estate tax is divided by the buyer and seller according to the number of days each owned the property during the year.
During settlement, if they handle it correctly, you will reimburse the seller for RE taxes he already paid for days you will own the home. In this case, you can include the RE taxes you pay on the HUD form because they are for days in which you own the home, regardless of the fact that they are being paid directly to the seller and not the tax authority.
However, you can NOT deduct RE taxes you pay on behalf of the seller for days in which the seller owned the house. Conversely, if the seller pays RE taxes for days in which YOU own the house, regardless whether your reimburse the seller or not, you get to include those on Schedule A.
In summary, all RE paid for days in which you own the house, regardless who pays them, are a deduction on your Schedule A. All RE taxes you pay for days in which you do NOT own the house are not deductible by you on your Schedule A….they are added to the basis of your house, but you can not write them off.
Hope this helps 🙂
Robert asks…
Refinancing closing costs – tax deductible?
I have read both publications 936 and 530 from the IRS on this. I see where closing costs are included in the basis of the home when you buy it but what about when you refinance? Is it deductible then and if so, where does it go on the tax return?
admin answers:
It would be reported on the Schedule A. You must Itemize your deductions rather than taking the Standard Deduction in order to claim the qualified expenses on your Tax return
The only things allowed are Mortgage Interest , Points ( on a refinance it has to be split up for the life of the loan) and Real Estate Taxes , all other costs become part of the basis
http://www.irs.gov/publications/p936/ar02.html#d0e1320
William asks…
Are any of a Seller’s Closing costs tax deductible?
My husband and I were married in June. I moved into the home he owns and I owned my own home too. I sold mine and paid $11K in closing costs. I know the property tax part ($2700.00) I paid at closing is deductible, but what about any of the other fees I paid at closing as a seller? I sold the house for exactly what I owed the bank on it so I wasn’t upside down and it wasn’t a short sale or anything like that. But as you probably know there is a laundry list of other fees, the realtor’s commission being the largest part, then the taxes, etc.
Just want to get the most out of our tax return
Thanks for your help.
admin answers:
With out seeing the HUD no one can tell so take it to a tax pro as there may well be some that are deductible. When I say a tax pro I am not saying these pop up locations like Jackson Hewitt or Block get a real professional like a CPA. Well worth the money
Linda asks…
What portion(s) of my closing costs are tax deductible?
For an FHA refinance mortgage loan, what portion(s) of the closing costs can I wrote off??
admin answers:
You can deduct on schedule A, the amounts shown for (1) interest, (2) property tax for the period after you bought the home, (3) points or loan origination fees, (4) mortgage insurance.
All of the other costs would either (1) be added to the cost basis of your home or (2) be non-deductible.
Richard K
Master Tax Advisor
Enrolled Agent
This advice is based upon my understanding of the tax law at the time it was written as it applies to the facts provided by you. See my profile for more information.
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