Are Closing Costs Tax-Deductible? What You Should Know

10 July 2026

Buying a home is an exciting journey, but it also comes with a pile of expenses—one of the biggest being closing costs. If you're wondering whether you can deduct these costs on your taxes, you're not alone. The short answer? Some closing costs are tax-deductible, while others aren’t.

In this article, we’ll break down which closing costs you can write off, which ones you can’t, and how to maximize your tax savings when buying a home.

What Are Closing Costs?

Before diving into tax deductions, let’s get clear on what closing costs actually are.

Closing costs are the fees and expenses you pay when finalizing a home purchase or refinancing a mortgage. They typically range from 2% to 5% of the total home price and cover things like lender fees, title insurance, appraisal costs, and legal expenses.

Some common closing costs include:

- Loan origination fees
- Discount points
- Appraisal fees
- Title insurance
- Attorney fees
- Home inspection fees
- Prepaid property taxes and insurance

Now, let’s get to the important part—what can you deduct from your taxes?

Which Closing Costs Are Tax-Deductible?

While you can’t deduct all closing costs, you can write off a few key expenses, which might help reduce your tax bill.

1. Mortgage Interest

If you financed your home with a mortgage, chances are you’ll be able to deduct some of your mortgage interest. The IRS allows homeowners to deduct interest paid on a mortgage for a primary or secondary residence, provided your loan meets certain limits.

2. Mortgage Points (Discount Points)

Mortgage points, also called discount points, are fees you pay to your lender upfront to reduce your interest rate. Good news? These points are tax-deductible in the year you pay them—if they meet IRS guidelines.

To qualify for a deduction, the following must be true:

- The loan is used to buy, build, or improve your primary home.
- Paying points is a common practice in your area.
- The points are based on a percentage of your loan amount.
- You paid for them at closing, not added to the loan.

If you refinanced your mortgage, you can still deduct points, but you’ll need to spread the deduction over the life of the loan, rather than taking it all at once.

3. Property Taxes

Any prepaid property taxes you pay at closing are tax-deductible. Since property taxes are an ongoing homeownership expense, you can deduct them each year when filing your taxes.

4. Mortgage Insurance Premiums (For Certain Loans)

If you pay for private mortgage insurance (PMI) on a conventional loan, or mortgage insurance premiums (MIP) on an FHA loan, your payments may be deductible. However, this deduction is often subject to income limits and changes in tax laws.

Which Closing Costs Are Not Tax-Deductible?

Unfortunately, not all closing costs qualify as tax deductions. Here are some common home-buying expenses you can’t write off:

- Appraisal fees
- Home inspection fees
- Title insurance
- Homeowner’s insurance premiums
- HOA fees
- Attorney fees (unless related to loan interest or taxes)
- Transfer taxes

While these costs aren’t deductible, they do play a role when determining the cost basis of your home, which can be helpful when you sell the property.

How to Claim Closing Cost Deductions

Want to make sure you’re deducting every possible expense? Follow these steps:

1. Gather Your Closing Disclosure Statement

At closing, you should receive a Closing Disclosure from your lender, which lists all the fees and expenses. This document will show how much mortgage interest, points, and property taxes you paid.

2. Itemize Your Deductions

Mortgage interest and property tax deductions require you to itemize deductions rather than taking the standard deduction. If your total deductions (including mortgage-related ones) exceed the standard deduction, itemizing could save you money.

3. Use the Right Tax Forms

- IRS Form 1040, Schedule A – This is where you report mortgage interest, points, and property taxes.
- IRS Form 1098 – If you paid mortgage interest, your lender should provide you with this form.

If taxes overwhelm you (we get it), consider working with a tax professional to ensure you maximize your deductions.

Are Closing Costs Deductible When Selling a Home?

If you're selling a home, you might wonder if you can deduct closing costs. Here’s the deal:

Most closing costs aren’t directly deductible when selling, but they can still benefit you. Some costs, like real estate commissions, legal fees, and title insurance, can be added to your home’s cost basis.

Why Does Cost Basis Matter?

When you sell a home, you’ll owe capital gains tax on your profit (selling price minus cost basis). By adding certain closing costs to your home’s cost basis, you reduce your taxable profit—potentially lowering your tax bill.

Can You Deduct Closing Costs on a Refinance?

If you’re refinancing your mortgage, the rules around tax deductions change a bit.

- Mortgage Interest? ✅ Yes, deductible
- Points? ✅ Yes, but spread out over the life of the loan
- Property Taxes? ✅ Yes, deductible
- Other Closing Costs? ❌ No, not deductible

Other Ways to Save on Taxes as a Homeowner

Even though most closing costs aren’t deductible, there are still other tax perks to owning a home.

1. Home Office Deduction

If you work from home and have a dedicated office space, you may qualify for a home office deduction.

2. Energy-Efficient Home Upgrades

Did you install solar panels or energy-efficient windows? The IRS offers tax credits for certain eco-friendly home improvements.

3. Capital Gains Exclusion

If you sell your primary home after living there for at least two out of the last five years, you might qualify for up to $250,000 (or $500,000 for married couples) in tax-free profit.

Final Thoughts

Closing costs can add up fast, so it’s natural to want to deduct as much as possible. The key takeaway? While some costs—like mortgage points, interest, and property taxes—are tax-deductible, many others aren’t.

To make the most of your deductions, keep your paperwork organized, itemize when necessary, and consult a tax professional if you're unsure.

Owning a home comes with both financial responsibilities and rewards—so why not take advantage of every tax break available?