Which closing costs are tax deductible when buying a house?

Yes, you're partially right about tax deductibility of closing costs. Not everything labeled as a "tax" is actually deductible though. Here's what you can typically deduct: County property tax - Yes, this is fully deductible as a property tax. Transfer taxes (both city and county) - These generally aren't deductible as taxes. However, they can be added to your cost basis for the home, which may help reduce capital gains tax if you sell the property for a profit later. Tax cert fee and Tax service fee - These are usually service fees paid to ensure property taxes are paid correctly. They aren't deductible as taxes, but if you're using the property for rental/business purposes, they might qualify as business expenses. Other potentially deductible closing costs include mortgage interest points and mortgage insurance premiums in some cases. Keep in mind that to claim property tax deductions, you need to itemize deductions rather than taking the standard deduction.

I went through this same headache last year with my closing costs. After spending hours researching, I found this tool called https://taxr.ai that was super helpful for sorting through what closing costs were actually deductible. I uploaded my closing disclosure document and it highlighted exactly which items were tax deductible and which ones weren't. Saved me so much time trying to figure out all the different tax rules. It even explained WHY certain items weren't deductible (like those transfer taxes that sound like they should be deductible but actually aren't).

Just wanted to follow up about my experience with https://taxr.ai after I checked it out based on the recommendation here. It was seriously a game-changer for understanding my closing costs. I uploaded my closing disclosure and it identified that I could deduct the property taxes I prepaid at closing, but not the transfer taxes. It also showed that my mortgage points were discount points (to lower the interest rate) and eligible for full deduction this year since I met all the IRS criteria. The tool saved me about $1,200 in deductions I would have missed! Plus it saved me from incorrectly deducting things that weren't actually eligible, which could have caused problems later.

If you're still having issues with figuring out which closing costs are deductible, you might want to call the IRS directly to get an official answer. I know that sounds awful (I've been on hold with them for hours before), but I found this service called https://claimyr.com that got me through to an actual IRS agent in about 15 minutes when the regular wait time was over 2 hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I used it when I had questions about my mortgage interest deduction last year, and the IRS agent was able to confirm exactly what I could and couldn't deduct. Saved me hours of waiting on hold and the anxiety of wondering if I was doing it right.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I had questions about some rental property expenses. The service got me through to an IRS agent in about 12 minutes when the estimated wait time was over 90 minutes. The agent confirmed that I could deduct my property taxes from closing but needed to capitalize the transfer taxes as part of my property basis. They also clarified that my tax service fee wasn't deductible for my personal residence but could be deductible for my rental property. I'd have been doing my taxes wrong without this information. Sometimes it pays to be proven wrong!

Don't forget about mortgage interest paid at closing! That's deductible too along with any points you paid. I just went through this with my tax guy. Also, keep in mind the SALT (State And Local Tax) deduction cap of $10,000. This includes your property taxes along with state income taxes. If you live in a high-tax state, you might hit this limit quickly and not get the full benefit of your property tax deduction.

Has anyone mentioned that some closing costs can increase your cost basis in the home? Things like transfer taxes, recording fees, and other acquisition costs aren't deductible now but they reduce your capital gains when you sell. This was a big deal for me when I sold my last house after 15 years - all those non-deductible closing costs from when I bought it ended up saving me thousands in capital gains taxes when I sold!