| If you have recently purchased a home, you may | | | | sales contract and deed, fees for the title search, |
| be wondering how all of the real estate closing | | | | transfer taxes, surveys, utility installation fees, |
| costs can impact your income tax return. The | | | | owner's title insurance, and recording fees. Also, |
| closing costs were split between yourself and the | | | | any amounts of money owed by the seller that |
| seller according to whatever arrangement you | | | | you agreed to pay upon closing like sales |
| negotiated. If you had your home built, you most | | | | commissions, repair or improvement expenses, |
| likely paid these costs when you made settlement | | | | back taxes and recording fees, mortgage fees, or |
| on your mortgage, or before; when you acquired | | | | others. |
| the land. | | | | The tax benefits of the tax basis kick in when |
| The only tax-deductible closing costs, as they | | | | you sell your residence. The total of these costs, |
| pertain to a primary residence, are your real | | | | along with others, will be used to determine if you |
| estate taxes, pro-rated property taxes, | | | | made a profit or took a loss on this property. |
| mortgage points, and your interest on your | | | | They will be deducted from the profit as costs. |
| mortgage. You paid these sums at closing, even | | | | This will affect your capital gains tax at that time. |
| though some of them are not, technically, closing | | | | Some items that do not qualify as a tax |
| costs. You can only claim these costs if you file | | | | deduction or tax basis are things such as rent for |
| an itemized tax return. You must claim the | | | | occupying the home prior to closing, fire insurance |
| deductions for the tax year in which you | | | | payments, appraisal fees, credit report costs, any |
| purchased your home. | | | | charges or fees for using the home prior to |
| Unfortunately, all the other fees and charges you | | | | closing, loan assumption fees, PMI fees, or any |
| paid at the time of closing are not tax-deductible, | | | | fees and charges related to refinancing a |
| they are simply costs incurred in the purchase of | | | | property. |
| your home. These charges do, nonetheless, add | | | | When it comes time to sell your primary |
| to the tax basis of your home and will come into | | | | residence, if you ever do, you should consult a |
| play when, and if, you sell your primary residence. | | | | real estate tax specialist who can advise you on |
| Adding to the tax basis of your home are the | | | | many ways to save tax liability and avoid capital |
| abstract or title fees, legal fees for preparing the | | | | gains taxes. |