Closing costs when buying a home include a range of fees — and only some have immediate tax deductibility.
Mortgage points paid to reduce your interest rate may be fully deductible in the year paid (for a primary residence purchase).
Property taxes prepaid at closing are deductible (subject to the $10,000 SALT cap).
Most other closing costs — title insurance, escrow fees, appraisal, credit report, transfer taxes — are not immediately deductible but add to your home's cost basis, reducing future capital gains taxes.
Buyers also curious about which closing costs are deductible when selling should review that guide separately — the rules differ significantly.
Is Closing Costs (Home Purchase) Tax Deductible?
Deductible closing costs in the purchase year: (1) Mortgage discount points (prepaid interest) — generally deductible in full in the year paid when purchasing a primary residence if meeting IRS criteria; (2) Prepaid mortgage interest; (3) Property taxes allocable to you as the buyer.
Non-deductible costs (but add to basis): appraisal fee, home inspection cost, recording fees, transfer taxes, escrow accounts fees, origination fees (other than discount points), credit report fee.
Understanding how much house you can afford — including these closing costs — is an important step in the home-buying process.
Requirements and Conditions
Mortgage discount points are deductible if: they are a percentage of the principal loan amount; they appear on the HUD-1/Closing Disclosure as points; the loan is used to purchase your primary home; they are computed as a percentage of the loan amount.
Points on refinances must be amortized (deducted over the life of the loan).
Property taxes paid at closing reduce what the seller owes and are deductible by you as the buyer for the portion attributable to your ownership period.
The mortgage interest deduction also continues to apply to ongoing monthly payments once the home is purchased. Tracking your average mortgage payment breakdown helps identify the deductible interest portion each year.
Important Limitations
Adding non-deductible closing costs to your home's basis ($300,000 purchase + $8,000 in closing costs = $308,000 adjusted basis) pays off when you sell.
This reduces your taxable gain, potentially saving taxes if gain exceeds the $250,000/$500,000 exclusion.
Keep your HUD-1 or Closing Disclosure permanently.
At sale time, knowing which closing costs reduce your taxable gain when selling will matter. Homeowners who have also made improvements should document those separately — home improvements that are deductible when selling add to basis just as these purchase closing costs do.
Frequently Asked Questions
Can you deduct closing costs (home purchase)?
Deductible closing costs in the purchase year: (1) Mortgage discount points (prepaid interest) — generally deductible in full in the year paid when purchasing a primary residence; (2) Prepaid mortgage interest; (3) Property taxes allocable to you as the buyer.
Non-deductible costs (but add to basis): appraisal fee, title insurance, home inspection, recording fees, transfer taxes, escrow fees.
Do I need to itemize to claim this deduction?
Yes — most personal expense deductions require itemizing on Schedule A (Form 1040).
You itemize only if your total itemized deductions exceed the standard deduction ($14,600 for single/$29,200 for married filing jointly in 2026 tax year).
Prepaid mortgage points and interest are claimed on Schedule A alongside your ongoing mortgage interest deduction.
What is the standard deduction for 2026?
The 2026 standard deduction is $14,600 for single filers and $29,200 for married filing jointly. Most taxpayers benefit more from the standard deduction than itemizing. New homeowners often find that mortgage interest and property taxes push them above the standard deduction threshold.
Where do I report this deduction?
Most personal itemized deductions are reported on Schedule A (Form 1040). Deductible mortgage points are reported on Schedule A, typically via Form 1098 from your lender. Business deductions go on Schedule C or the appropriate business form.
Should I itemize or take the standard deduction?
Itemize only if your total deductible expenses (mortgage interest, SALT, charitable gifts, medical expenses, etc.) exceed the standard deduction.
For most taxpayers, the standard deduction is larger.
New homebuyers are among the most likely candidates to benefit from itemizing, given significant interest costs in early mortgage years.
Sources & References
- IRS — Publication 530 Tax Information for Homeowners — https://www.irs.gov/publications/p530
- IRS — mortgage interest deduction (Publication 936) — https://www.irs.gov/publications/p936
- IRS — Publication 523 Selling Your Home (basis adjustment) — https://www.irs.gov/publications/p523
- Consumer Financial Protection Bureau — home buying closing cost overview — https://www.consumerfinance.gov/owning-a-home/closing/
Last updated: April 27, 2026