Are Closing Costs Tax-Deductible?

When you’re filing your taxes, there’s a whole lot to consider. From figuring out who counts as a dependent to organizing your income streams, you may find the process a bit overwhelming. And if you’re a new homeowner tackling mortgage payments, there’s another key question you’ll want to know the answer to this tax season as you try to lower your tax liability: Are closing costs deductible on your recent home purchase? A financial advisor can help you optimize your tax strategy for your property and family needs.

Are Closing Costs Tax-Deductible?

Simple answer: it depends. Homeowner tax deductions can be very difficult to calculate, given all the varying factors that go into the equation. To find out whether the closing costs on your particular home purchase count, check out what the IRS says in its tax deduction breakdown in Form 1040 and on its website.

As with all possible tax deductions, beyond just home-related ones, it is the responsibility of the taxpayer to report each of the taxes and fees related to the purchase as itemized deductions. Also with all possible tax deductions, your priority is most likely to save money and earn tax advantages.

For this purpose, do the groundwork: research whether taking a standard deduction versus deducting your closing costs would save you the most. The standard deduction for tax year 2025 is $15,750 for single filers and $31,500 for married couples filing jointly. In the tax year 2026, it will increase to $16,100 for single filers and $32,200 for married couples filing jointly.

Which Particular Closing Costs Can You Deduct?

You can’t completely deduct all the costs of closing on your house, but there are a few that are deductible. The IRS denotes the following as deductible costs:

Sales tax paid at closing
Real estate taxes charged to you when you closed
Mortgage interest you paid when the cost was settled
Real estate taxes that were paid for by the mortgage lender
The interest you paid at the time of the home purchase
Loan origination fees (a.k.a. “points”). These would be written as a percentage of the borrowed money.

Variation exists among these costs, and each house purchase carries different rules. Be sure to double-check whether your needs fit with these, and reach out to your lender or advisor if you’re not sure.

Loan Origination Fees

SmartAsset: Are Closing Costs Tax-Deductible?

When thinking about whether closing costs are tax deductible, it’s important to understand the role of loan origination fees or points. Lenders charge loan origination fees in return for their underwriting your mortgage. The service includes identity, credit and paperwork verification and preparation, and it is crucial for closing on the deal. This fee will come out to about 1% of your mortgage.

Loan origination fees are important to consider because sometimes they can be tax-deductible if you purchased your home within a year of filing the taxes. The IRS allows you to deduct these fees only under certain conditions. These include using the loan to buy your primary residence, securing the loan for that same residence and not paying points in place of other fees such as appraisal costs, attorney’s fees or property taxes.

Which Closing Costs Are Completely Non-Deductible?

While certain closing costs may qualify for tax deductions, many others do not. Here are the common expenses that are strictly non-deductible:

Pre-move-in utility charges
Fire and flood insurance or certificates
Pre-closing rent (if you moved in early)
Mortgage refinancing
Title fees
Real estate commissions
Costs of appraisal
Home inspections
Credit report fees
Transfer taxes
Attorney fees

These non-deductible expenses are added to the cost of the property. For a complete list, consult the IRS tax policy list, which you can find on the agency’s website. Another important point: The higher your income is, the less you can deduct from your income taxes.

How to Fill Out 1040 in Accordance with Closing Cost Deductions

It can be challenging to calculate your own homeowner tax deductions, but the IRS does a good job of breaking it down once you arrive at the 1040 Form. The only way to deduct your closing costs is to provide a list of itemized deductions. This requires a bit of forethought.

You can’t take the standard deduction while also deducting your original closing costs. Therefore, it’s up to you to pick which one offers the best tax advantages for your finances. That’s where a tax professional or financial advisor could be helpful.

Bottom Line

There is no clear-cut answer on whether closing costs are tax-deductible because no two closing cost situations are the same. Depending on factors such as personal wealth, tax bracket, home cost, permanent residence location and related fees, you can be anywhere from 10% to 90% exempt. If you’re unsure of where specifically you fall on the spectrum, talk to a trained financial advisor to help you make the important decisions while retaining as many benefits as possible.

Tips for Managing Your Taxes

If you need help with your taxes, a financial advisor can be a huge help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you don’t know whether you’re better off with the standard deduction versus itemized, you might want to read up on it and do some math. You could save a significant amount of money by educating yourself before the tax return deadline.
SmartAsset has several free online tax resources designed to help you get your finances in order during tax season. Check out our Income Tax Calculator and get started today.