What home purchase costs can I deduct on my tax return?
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| 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.
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| Tax |
You
CAN deduct the
following taxes |
You
CANNOT deduct the following taxes |
| 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. |
Import duties. |
| Sales Tax |
State and Local sales taxes are deductible provided you make
the election on Schedule A, line 5, to claim them in lieu of State and
Local income taxes. |
|
| Other
Tax |
Tax that is an
expense of your trade or
business.
One half of self employment tax paid.
Tax on property producing rent or royalty income.
Occupational tax. |
Taxes on alcoholic
beverages, cigarettes, and tobacco. Taxes on gasoline, diesel, and other
motor fuels used in a non-business vehicle. Federal social security
(FICA), railroad retirement, gift, and excise taxes or customs duties.
Per capita taxes. (See IRS Publication 17 for details.) |
| Fees and Charges |
Fees and charges that are expenses of your trade or business or of
producing income. |
Fees and charges, such as
those for driver's, hunting, fishing, or dog licenses; fines and
penalties; or water, sewer,
and utility taxes or bills, generally are not tax deductible. (See IRS Publication 17 for details.) |
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| 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. |
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Related tax
information about home purchase cost tax deductions |
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|
Interest Tax Deductions
Points
Taxes
Home Office Tax Deductions
Itemized Tax Deductions |
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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. |
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Ask Julian Block your IRS and tax questions! |
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If you can't find the answer to your IRS or tax question in our
web you can call former IRS Special Agent and one of the country's foremost tax attorneys, nationally syndicated columnist ("The Tax
Adviser") Julian Block. Julian is also the tax Editor of Mutual Funds Magazine, America's premier investment magazine. To
call Julian for a tax consultation click
here. |
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