What Closing Costs Are Tax-Deductible When Purchasing a Home?

Buying a home comes with a long list of closing costs, and it's natural to wonder whether any of them can help lower your tax bill. The good news is that some closing costs may be tax-deductible. The not-so-good news is that most are not.

Here's what you need to know when preparing your 2026 tax return (filed in 2027).

Are Closing Costs Tax-Deductible?

In most cases, closing costs aren't fully tax-deductible. However, certain expenses paid at closing may qualify as itemized deductions on your federal tax return.

Generally, the two main closing costs that may be deductible in the year you buy or build a home are:

• Mortgage interest, including certain discount points
• Real estate (property) taxes

To claim these deductions, you must itemize deductions on Schedule A instead of taking the standard deduction.

Mortgage Interest and Points

If you paid mortgage interest at closing, that amount may be deductible for the tax year in which you paid it.

You may also be able to deduct points, sometimes called discount points, that you paid to lower your mortgage interest rate. Points are generally considered prepaid mortgage interest, and many homebuyers can deduct them in the year of purchase if IRS requirements are met.

Example: Deductible Mortgage Interest

Let's say your closing disclosure shows:

• $3,000 of mortgage interest
• $2,000 in discount points

If you qualify, you may be able to deduct the full $5,000 as an itemized deduction on Schedule A.

Property Taxes Paid at Closing

Property taxes paid at closing may also be deductible.

For example, if you reimbursed the seller for property taxes or prepaid property taxes at settlement, the amount you actually paid may qualify as an itemized deduction.

Keep in mind that state and local tax deductions, including property taxes, are subject to federal limits.

Example: Deductible Property Taxes

If your closing disclosure shows that you paid $1,200 in property taxes at closing, you may be able to claim that amount as an itemized deduction, subject to applicable IRS limits.

What Closing Costs Are Not Tax-Deductible?

Most other home-buying expenses aren't deductible in the year you purchase the home. Common nondeductible closing costs include:

• Title insurance
• Appraisal fees
• Attorney fees
• Home inspection fees
• Recording fees
• Survey fees
• Transfer taxes paid by the buyer
• Loan underwriting and processing fees
• Credit report fees

While these costs generally don't provide an immediate tax benefit, they're not necessarily lost.

Can Nondeductible Closing Costs Help Later?

Yes. Many closing costs related to purchasing the property can be added to your home's cost basis.

Your cost basis is generally the amount you've invested in the property. When you eventually sell your home, a higher cost basis can reduce your taxable gain, potentially lowering any capital gains tax you may owe.

That's one reason it's a good idea to keep your closing disclosure and other home-purchase records for as long as you own the property.

The Bottom Line

Most closing costs aren't tax-deductible when you buy a home. However, mortgage interest, qualifying points, and property taxes paid at closing may provide valuable tax deductions if you itemize.

If you're using tax software, be sure to keep your closing disclosure handy. It can help you identify deductible expenses and track costs that may increase your home's basis for future tax benefits.