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Tax Refund

Mortgage Library: Ask a Mortgage Related Question: Answers: Tax Refund

Question:

I had a question for you. How much of one's closing cost can one claim as far as income tax refund?

Thanks,

J. B.
Wentzville
Missouri

Answer:

Dear Jeffery,

There are two ways that closing costs can benefit you on your tax return.

The first is an immediate benefit at the end of the tax year in which you purchased the house. The lender to whom you are making payments will provide you with a statement regarding the amount of interest you have paid during the year, which is deductible if the property is your primary residence or a second home. They will include any pre-paid interest or discount points you paid at closing since these are considered interest paid in advance.

Other closing costs, such as origination, processing, underwriting, appraisal, etc, are not immediately deductible, but do come into play if you need to calculate your cost basis for the home when you sell it. This can greatly effect capital gains tax calculations, so you'll want to keep good track of your closing documents.

As always you'll want to discuss these items with a tax professional to determine how they affect your individual tax situation.

Thanks.

Mark Verdi
Mortgage Advisor
Arkansas Mortgage Professionals/
US Mortgage & Investments
Apply Online at www.armortpro.com
(479) 254-6804 Office
(479) 254-9689 Fax
(479) 426-6545 Cell
mverdi 'at' armortpro.com
mark.verdi 'at' gmail.com


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