Have you just bought your first home? Are you thinking of moving into another place, looking for some sort of upgrade from your first? Wherever you are on the home purchasing spectrum, you will likely pay some “closing costs” at the finalization of the sale. Sometimes known as settlement fees, these expenses are added to the sale price of the house. In typical cases, the seller and the purchaser agree to split the closing costs.
While the closing costs can qualify for a tax deduction, the IRS has a strict rule for which type of closing costs are eligible. When you file your tax return for the year in which your home was purchased, you can deduct mortgage interest and real estate taxes.
If you paid in points, a1098 Statement will list the amount paid and mortgage interest. To deduct these costs you have to itemize your expenses and file the return the same year you purchased the home.
