Tax Season: Are Closing Costs Tax Deductible?
CMS Mortgage Solutions Inc.
CMS Mortgage Solutions Inc.
Published on March 19, 2023

Tax Season: Are Closing Costs Tax Deductible?

Are closing costs tax deductible? This is a question that many homeowners ask during tax season, as these costs can be expensive and it would be beneficial to receive some kind of relief from them. Fortunately, closing costs may qualify for certain deductions on your taxes depending on the type of expense. In this article, we will discuss the different types of costs and their potential implications when filing taxes. We'll also provide guidance on how to prepare your closing cost documents in order to maximize any potential deductions you may be eligible for so you can get the most out of your home purchase or sale.

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What closing costs are tax deductible?

Generally, these costs that can be deducted from your taxes fall into two categories - costs associated with the loan and costs associated with purchasing the home. Loan-related closing costs, such as origination fees, points paid for a loan, and certain other miscellaneous expenses may be tax deductible. On the other hand,  costs related to purchasing the home (such as title insurance premiums and transfer taxes) are typically not tax deductible.

How do I prepare my documents for filing taxes?

To maximize any potential deductions you may be eligible for when it comes to closing costs, it's important to keep all of your documents organized. Be sure to save all invoices, statements, and loan documents for your records. Additionally, if you paid points to obtain a lower interest rate on your loan, it's important to calculate the total amount of points that were paid in order to ensure all costs are recorded correctly when filing taxes.

Tax season can be stressful and these costs can add up quickly. Hopefully this article has provided clarity regarding the tax implications of costs so homeowners can take full advantage of any potential deductions they may qualify for. With some patience and organization of closing cost documents, homeowners can maximize their deductions and receive some relief during tax season.

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CMS Mortgage Solutions Inc.
CMS Mortgage Solutions Inc. Virginia Beach
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