Can I use the closing costs of the home I purchased as an itemized deduction for my federal tax return?
- Bostonian In MOLv 71 decade agoFavorite Answer
Points for your mortgage are deductible in the year you close. They will be included on a Form 1098 (not a 1099 as another poster stated) that you should have received from you lender by now.
Most of the other closing costs are added to your cost basis and will reduce your gain when you eventually sell. The costs attributed to prepaid property taxes and homeowners insurance are simply funds set aside for payment of a future debt and are not added to your basis.
Property taxes get tricky. Money credited to the buyer must be SUBTRACTED from the property taxes otherwise paid in the year that you close as they are paid by the seller and you will pay them to the tax authorities for the seller's benefit. Property taxes credited to the seller should be ADDED to any property tax bills that you pay in the year that you close -- the exact opposite of the first situation.
- Brian GLv 61 decade ago
Only the points you paid on your loan. You will receive a 1099 from your lender showing the points and all interest paid (including prepaid interest in the closing costs) at the end of the year. Other closing costs are not deductible.
- ErikaLv 44 years ago
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- 1 decade ago
I agree with Brian, but you can also deduct any real estate taxes that were prorated and charged to you at closing.