If you’re a homeowner, you may have paid closing costs when you purchased or refinanced your home. Closing costs are fees associated with the home buying process, such as appraisal fees, title fees, and loan origination fees. But are these costs tax deductible? In this article, we’ll explore the topic of closing costs and their tax deductibility.
Understanding Closing Costs
Types of Closing Costs
There are many different types of closing costs, including:
Which Closing Costs Are Tax Deductible?
Here are some closing costs that may be tax deductible:
How to Deduct Closing Costs on Your Taxes
What if You Don't Itemize Deductions?
Yes, you may be able to deduct the points you paid at closing to refinance your home. However, the deduction must be spread out over the life of the loan.
First-time homebuyers may be eligible for a tax credit called the First-Time Homebuyer Credit. However, this credit is not related to closing costs and has different eligibility requirements.
If the seller gave you a credit to cover some of your closing costs, you may not be able to deduct those costs on your taxes. Consult with a tax professional for guidance.
If you refinanced your home multiple times in a year, you may be able to deduct the points you paid on each refinance. However, you’ll need to spread the deduction out over the life of each loan.
Closing costs related to a rental property are generally deductible as business expenses. However, the rules surrounding this can be complex, so it’s best to consult with a tax professional.
Haoliday & more Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.