{"id":72120,"date":"2025-08-29T08:55:29","date_gmt":"2025-08-29T15:55:29","guid":{"rendered":"https:\/\/www.redfin.com\/blog\/?p=72120"},"modified":"2025-08-29T09:40:55","modified_gmt":"2025-08-29T16:40:55","slug":"are-closing-costs-tax-deductible","status":"publish","type":"post","link":"https:\/\/www.redfin.com\/blog\/are-closing-costs-tax-deductible\/","title":{"rendered":"Are Closing Costs Tax-Deductible?"},"content":{"rendered":"

When you buy a home, closing costs can feel like a significant expense, often with thousands of dollars due at the time of signing. Many buyers naturally wonder if any of these costs are tax-deductible.\u00a0<\/span><\/p>\n

The short answer is that most closing costs are not<\/em> tax-deductible, <\/b>though certain items, like mortgage interest, discount points, and prepaid property taxes, may be. Other costs, while not immediately deductible, can be added to your home\u2019s cost basis, potentially reducing your tax liability when you sell.<\/span><\/p>\n

This <\/span>Redfin<\/span><\/a> real estate article explains which closing costs you can deduct, which you cannot, and how to make the most of your home\u2019s cost basis for future tax benefits so you can plan accordingly.<\/span><\/p>\n

Which closing costs are tax-deductible?<\/span><\/h2>\n

Closing costs<\/span><\/a> are the fees and expenses you pay to finalize a real estate transaction. They usually range between 2% and 5% of the home\u2019s purchase price and may include loan origination fees, title insurance, recording fees, prepaid taxes, and more.<\/span><\/p>\n

While most closing costs are not tax-deductible, mortgage interest, discount points, and property taxes can usually be deducted, but only if you itemize your deductions on your tax return.<\/b> If you take the standard deduction, which is the most advantageous choice for many taxpayers, these deductions generally do not apply.<\/span><\/p>\n

1. Mortgage interest<\/b><\/h3>\n

Prepaid <\/span>mortgage interest<\/span><\/a>, often collected at closing, is generally fully deductible in the year it is paid. This includes interest that accrues between the closing date and the end of the month. Your lender will report this amount on Form 1098, which should be retained for your tax records.<\/span><\/p>\n

Keep in mind that there are <\/span>limits to how much mortgage interest you can deduct<\/span><\/a> \u2013 typically on loans up to $750,000 for most new mortgages, or $1 million for older loans taken out before December 16, 2017. Interest on your primary residence is usually deductible, and sometimes a second home may qualify as well. Since tax rules can change, it\u2019s a good idea to check with your tax professional to confirm what applies to your situation.<\/span><\/p>\n

2. Discount points<\/b><\/h3>\n

Mortgage points<\/span><\/a>, also called discount points, are fees paid to a lender to <\/span>lower your interest rate<\/span><\/a>. Each point usually costs 1% of your mortgage amount and can reduce the interest rate by roughly 0.25% per point. Points may be deductible in the year of purchase, as long as:<\/span><\/p>\n