Are closing costs tax-deductible?

Some closing costs are tax-deductible, including property taxes and points

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Closing costs are a set of fees and expenses that are paid to the lender when a person takes out a mortgage. Some closing costs are tax deductible. These fees and expenses vary and depend on the lender. Most closing costs range between 2% and 5% of the home price. Closing fees are paid when you sign for your mortgage and the home is transferred to your name.

Key insights

Property taxes and points are examples of closing costs that are tax deductible.

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If you itemize your taxes, you typically can deduct closing costs the same year you purchase your home.

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Mortgage premium insurance is no longer tax deductible for properties.

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Understanding closing costs 

Closing costs are expenses and fees that are incurred when you finalize a mortgage. Some costs include appraisal fees, property taxes, home inspections, homeowners insurance, title insurance and title service provider fees. Closing costs are typically between 2% and 5% of the total purchase price of the home. When signing legal documents to transfer home ownership, you're closing on a home.

What closing costs are tax deductible?

Some closing costs are tax deductible, including property taxes, prepaid interest and mortgage points. "In general, origination fees and points paid on a purchase loan to buy or build your primary residence are tax deductible," said Michelle White, national mortgage expert for The CE Shop. “It is always best to consult with a tax professional regarding your specific situation."

If you itemize deductions, closing costs can be deducted the same year you purchase your home, but don't expect to be able to deduct all closing costs from your taxes.

Property taxes

Local and state property taxes are deductible on your taxes the same year you pay the tax. You can deduct property taxes up to $10,000; if you're married and filing separately, it's $5,000.

Prepaid interest

Prepaid interest is the amount of interest that accumulates from the start of your loan date and the day you close on your home. For example, if you close on a home on April 5, you'll pay interest from April 5 to April 30, known as prepaid interest. Then, starting May 1, you'll pay the first interest payment along with the regular principal. Prepaid interest is deductible on your taxes.

Mortgage insurance premiums

Mortgage insurance premiums are no longer deductible. Any premiums paid after Dec. 31, 2021, are no longer tax deductible, per the IRS.


Points are associated with a loan that helps to reduce your interest rate. Points are a way to explain specific charges as paid or considered paid by a person who attains a home mortgage. According to the IRS, points are also referred to as maximum loan charges, loan discounts, loan origination fees or discount points.

Mortgage points are tax deductible, though you can't always deduct the entire amount in the year they are paid. There are a set of nine exceptions and all nine must be met for a borrower to deduct the entire amount of points in a year.

How to deduct closing costs on your tax return

When it comes time to deduct specific closing costs on your taxes, you'll need to use certain forms from the IRS. You should receive Form 1098 from your lender and reference line 8b and line 8c for deductible interests.

Use Form 1040, or Schedule A, to input on line 8a the points and home mortgage interest that are deductible. If you pay $600 or more in mortgage interest then you can expect to receive Form 1098. If you're doing your taxes for the following year, then you should receive this form by the end of January.

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    Are all closing costs tax deductible?

    No, not all closing costs are tax deductible.

    Can I deduct my closing costs if I'm selling my home?

    Closing costs can't be deducted when selling a home.

    What happens if I refinance my mortgage – can I still deduct closing costs?

    Yes, you can deduct closing costs on a refinance mortgage.

    Bottom line

    Taking out a mortgage to buy a home means you'll pay closing costs. These fees and expenses average around 2% to 5% of the purchase price of the property. Some of the closing costs can be deducted from your taxes — but not all of them. Property taxes and points are common closing costs that are tax deductible.

    Article sources
    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
    1. IRS, “Topic no. 504, Home mortgage points.” Accessed March 12, 2024.
    2. IRS, "Publication 530 (2023), Tax Information for Homeowners." Accessed March 12, 2024.
    3. IRS, "What are prepaid interest charges?"Accessed March 12, 2024.
    4. CoreLogic, “Average Closing Costs for Purchase Mortgages Increased 13.4% in 2021, CoreLogic’s ClosingCorp Reports.” Accessed March 12, 2024.
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