Are Closing Costs Tax Deductible

Your lender will send you Form 1098 (Mortgage Interest Statement) by January of the following year. This form typically lists the mortgage interest and points you paid. However, it may not include the pro-rated property taxes you paid at closing—for that, you must refer to your Closing Disclosure (CD) or HUD-1 settlement statement.

If the seller paid “points” on your behalf, the IRS actually treats it as if you paid them. You can claim the deduction for those points, but you must subtract that amount from your home’s cost basis. For other “seller concessions” (like the seller paying your title insurance), you cannot deduct those costs because you didn’t pay them out of pocket.

No. HOA fees, including any “transfer fees” or “initiation fees” paid at the closing table, are considered personal expenses and are not tax-deductible for a primary residence.

Yes! While this deduction expired in previous years, it has been restored for the 2026 tax year. If your adjusted gross income (AGI) is below $100,000 ($50,000 for individuals), you can treat your PMI premiums (including upfront premiums paid at closing) as deductible mortgage interest.

Even if a fee isn’t deductible today, it isn’t “lost.” You can add most non-deductible closing costs (like title insurance and recording fees) to your home’s cost basis.

This increases your “investment” amount in the eyes of the IRS, which reduces your taxable profit (capital gains) when you eventually sell the home.

The majority of closing costs are considered “costs of getting a loan” or “costs of acquiring property” and are not immediately deductible. These include:

• Appraisal and home inspection fees.

• Attorney, escrow, or notary fees.

• Title insurance (both Lender’s and Owner’s).

• Credit report fees and loan origination fees.

• Document recording fees and transfer taxes.

Yes. At closing, you often pay interest that accrues between your closing date and the end of the month. This “prepaid interest” is fully deductible in the year of purchase because it is technically mortgage interest.

You can deduct the portion of real estate taxes you paid for the period of the year you actually owned the home. Your Closing Disclosure will show a pro-rated amount.

Note: In 2026, the State and Local Tax (SALT) deduction cap has been increased to $40,000 ($20,000 if married filing separately), providing much more “room” for homeowners in high-tax areas to deduct their property taxes.

Yes. Mortgage points (also known as discount points) are considered prepaid interest.

• Primary Residence: If you bought the points to lower the rate on your main home, you can typically deduct the full amount in the year you paid them.

• Refinance: If you paid points to refinance, you usually have to deduct them proportionally over the life of the loan (e.g., $3,000 in points on a 30-year loan equals a $100 deduction per year).

Generally, the IRS only allows you to deduct costs that are considered prepaid interest or property taxes. Most other “service fees” (like appraisals or inspections) are not deductible. To claim these, you must itemize your deductions on Schedule A of your tax return rather than taking the standard deduction.