What home purchase costs can I deduct on my tax return?

When you bought your home, you probably paid settlement or closing costs in addition to the contract price. These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. If you built your home, you probably paid these costs when you bought the land or settled on your mortgage.

The only settlement or closing costs you can deduct on your tax return are home mortgage interest, points, and certain real estate tax. You deduct them on your tax return in the tax year you buy your home if you itemize your tax deductions on your tax return. You can add certain other settlement or closing costs to the tax basis of your home. There are some settlement or closing costs that you cannot deduct on your tax return or add to the tax basis.

Real estate tax is usually divided so that you and the seller each pay tax for the part of the property tax year that you each owned the home.

Which tax can I deduct on my tax return?

	You CAN deduct the following tax on your tax return	You CANNOT deduct the following tax on your tax return
Income Tax	State and local income tax. Foreign income tax. Employee contributions to state funds listed under State benefit funds.	Federal income tax. Employee contributions to private or voluntary disability plans.
Real Estate Tax	State and local real estate tax. Foreign real estate tax. Tenant's share of real estate tax paid by cooperative housing corporation.	Tax for local benefits. Trash and garbage pickup fees. Rent increase due to higher real estate tax. Homeowners association charges.
Personal Property Tax	State and local personal property tax.
Sales Tax	State and Local sales tax.
Other Tax	Tax that is an expense of your trade or business or producing income. One half of self employment tax paid. Tax on property producing rent or royalty income. Occupational tax.	Many taxes, such as federal excise tax, generally are not deductible. (See IRS Publication 17 for details.)
Fees and Charges		Fees and charges, such as for driver's licenses or water bills, generally are not tax deductible. (See IRS Publication 17 for details.)

You can include in your tax basis the settlement fees and closing costs that are for buying your home. You cannot include in your tax basis the fees and costs that are for getting a mortgage loan or a fee that is for buying the home if you would have had to pay it even if you paid cash for the home.

Related tax information about home purchase cost tax deductions

Tax Directory Topics:
Interest Tax Deductions
Points
Taxes
Home Office Tax Deductions
Itemized Tax Deductions

IRS publications about home purchase cost tax deductions:
See IRS publication 530,

Tax Information for First Time Homeowners, for more information about settlement or closing costs and determining the basis of your home. Also see IRS Publication 936,

Home Mortgage Interest Deduction and IRS Publication 17,

Your Federal Income Tax. Please read this IMPORTANT Editor's Note regarding navigating IRS publications with Adobe Acrobat Reader.
IRS publications can also be ordered by calling 1-800-829-3676.

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