Tax Question: As a first time home buyer, is my closing cost tax deductable?
I bought a house last year. It just occured to me that could I have claimed all (or portion) of my closing cost in '06 tax filing? If so, is there any way I can redo it?
- 1 decade agoFavorite Answer
When you purchase a home, the only thing deductible at that point are usually the mortgage interest for the year, any mortgage points that you paid (usually deductible over the life of the loan), and any share of property taxes you paid.
The closing costs are added to your basis in the property when you elect to sell. If when you sell your house, you have used it as your principle residence for 2 out of the last 5 years, you will be eligible for an exclusion of up to $250,000 (or $500,000 for married filing jointly) of the gain on the property. There are some restrictions, but most people will qualify.
In other words, if the net of your selling price minus your closing costs, improvements, purchase price, etc. is less than $250,000 you will pay no tax on the gain. This is where your closing costs come in. They are not deductible in the year of purchase, only the year of sale as a reduction to your gain.
You can file an amended tax return (Form 1040X) to claim any deductions you overlooked on your 2006 tax return.
Hope this helps!Source(s): work in taxes :-)
- Wayne ZLv 71 decade ago
Most closing costs are not deductible. Generally, only interest, property taxes and points are deductible.
If you missed any of these, you can amend your 2006 filing using form 1040X.
- SteveLv 61 decade ago
Closing costs are not deductable. However, they are added to the cost of your home. Save your paperwork, you will need this number when you sell.