Are Closing Costs Tax Deductible in 2026?
Last updated 05/13/2026 by
Ante Mazalin
Edited by
Andrew Latham
Summary:
Most closing costs are not tax-deductible, but three categories can produce a deduction for itemizers: qualifying mortgage points, per diem mortgage interest paid at closing, and the buyer’s share of real estate taxes paid at settlement.
All other settlement costs either add to the home’s adjusted basis or are neither deductible nor capitalized.
- Mortgage points (primary home purchase): Fully deductible in the year paid on Schedule A (Form 1040), Line 8a, if the loan meets all nine IRS criteria in IRS Publication 530. Points on refinance loans and second homes are generally deducted over the life of the loan.
- Per diem mortgage interest: Interest paid at closing for the remainder of the month is deductible as home mortgage interest on Schedule A (Form 1040), Line 8a, per IRS Publication 530.
- Property taxes paid at closing: The buyer’s allocable share of real estate taxes is deductible on Schedule A (Form 1040), Line 5b, subject to the annual SALT (state and local tax) deduction limit.
- All other closing costs (title fees, appraisals, recording fees, transfer taxes): Not deductible. These costs are added to the home’s adjusted cost basis per IRS Publication 530, which can reduce taxable gain when the home is eventually sold.
A closing statement can run several pages and list dozens of fees. Most of them will never appear on a tax return as a deduction, but knowing which ones qualify and which ones quietly increase your home’s basis, affects your taxes both at purchase and potentially at sale.
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Are closing costs tax-deductible? Most are not, but three items may qualify for itemizers
Most closing costs are not deductible. According to IRS Publication 530, the only settlement or closing costs you can deduct are qualifying mortgage points, per diem mortgage interest, and the buyer’s share of real estate taxes paid at settlement, and only then if you itemize deductions on Schedule A.
Other closing costs, including title insurance, appraisal fees, attorney fees, recording fees, and transfer taxes, are not deductible. Per IRS Publication 530, these costs instead add to the cost basis of your home, which matters when you calculate capital gain upon sale.
Standard deduction takers receive no immediate tax benefit from any closing costs. The deductions discussed here require itemizing on Schedule A.
Who can deduct closing costs?
Eligibility depends on whether you itemize, which costs were incurred, and how the property is used after purchase.
- Itemizing buyers of a primary or second home: Eligible to deduct qualifying mortgage points, per diem interest paid at closing, and the buyer’s share of real estate taxes paid at settlement, per IRS Publication 530. Points are fully deductible in the year paid only if the loan meets all nine tests described in IRS Publication 530, including that the loan was used to buy or improve the filer’s main home and the points were not paid in place of items ordinarily stated separately on the settlement statement (such as appraisal fees, inspection fees, or attorney fees). Points that do not meet the full-deduction tests must be spread over the life of the loan.
- Buyers of rental property: Eligible to deduct mortgage interest and property taxes on Schedule E, not Schedule A. Other closing costs on a rental property, title fees, loan origination costs, recording fees, are capitalized as part of the rental property’s cost basis and recovered through depreciation over the property’s useful life, not deducted in the year of purchase.
- Buyers who take the standard deduction: Not eligible to deduct any closing costs in the current year. The deduction for points, per diem interest, and property taxes all require itemizing on Schedule A. Closing costs that would otherwise be deductible on Schedule A produce no immediate federal tax benefit for standard deduction takers, though basis-adding costs still affect the eventual sale.
- Home sellers: Not eligible to deduct closing costs as a tax deduction. Per IRS Publication 530, transfer taxes paid by the seller and other selling costs reduce the seller’s amount realized on the sale, which lowers taxable gain. Points paid by a seller on behalf of the buyer’s loan are also not deductible as interest by the seller, they are treated as a selling expense that reduces proceeds.
A filer who pays $4,800 in closing costs, including $2,000 in qualifying points, $600 in per diem interest, $700 in prepaid property taxes, and $1,500 in title and recording fees, can potentially deduct $3,300 on Schedule A while adding the remaining $1,500 to the home’s adjusted basis.
How much of the closing costs can you deduct?
The deductible amount depends on which costs qualify under IRS Publication 530 and whether the filer itemizes. Non-qualifying closing costs increase the home’s basis rather than producing a current deduction.
| Closing cost type | Tax treatment | Where to report |
|---|---|---|
| Qualifying mortgage points (primary home purchase, meets all IRS tests) | Fully deductible in year paid | Schedule A (Form 1040), Line 8a (if on Form 1098) or Line 8c (if not on Form 1098) |
| Per diem mortgage interest paid at closing | Deductible as home mortgage interest | Schedule A (Form 1040), Line 8a |
| Buyer’s share of real estate taxes paid at settlement | Deductible, subject to SALT limit | Schedule A (Form 1040), Line 5b |
| Points on refinance or second home (not meeting full-deduction tests) | Deducted ratably over the life of the loan | Schedule A (Form 1040), Line 8a or 8c each year over loan term |
| Title insurance, appraisals, attorney fees, recording fees, transfer taxes | Not deductible; add to home’s adjusted cost basis | N/A (reduce capital gain at sale) |
Delinquent property taxes from a prior owner that you agree to pay when purchasing the home are not deductible as taxes. Per IRS Publication 530, they are treated as part of the cost of the home and added to basis.
How to deduct qualifying closing costs
Claiming the deduction requires reviewing your Closing Disclosure or HUD-1 settlement statement line by line and identifying which costs qualify under IRS Publication 530. Here is the process for eligible itemizers.
- Obtain and review your Closing Disclosure or HUD-1 settlement statement. This document lists every charge associated with the closing. Identify the line items for mortgage points (also called loan discount fees or origination points), per diem interest charged for the days from closing to the end of the month, and the real estate tax proration showing the buyer’s share of property taxes for the remainder of the year.
- Confirm whether your mortgage points meet the full-deduction tests in IRS Publication 530. To deduct points in full in the year paid, the loan must be secured by your main home, paying points must be an established practice in your area, the points must be calculated as a percentage of the loan principal, and the points must not substitute for separately stated charges (such as appraisal, inspection, or title fees). If any test is not met, the points must be deducted over the loan term rather than in the year paid.
- Separate deductible items from basis-adding items on your closing statement. Per IRS Publication 530, non-deductible closing costs, title insurance, attorney fees, recording fees, surveys, transfer taxes paid by the buyer, are added to the home’s adjusted cost basis. Keep a separate record of these amounts because they reduce your taxable capital gain when the home is sold, even though they produce no current deduction.
- Report qualifying amounts on Schedule A (Form 1040). Enter per diem interest and qualifying points shown on Form 1098 on Line 8a. If points were not included on Form 1098, enter them on Line 8c with the lender’s name and tax identification number. Enter the buyer’s allocable share of real estate taxes paid at closing on Line 5b. The total on Line 5b is subject to the combined SALT deduction limit alongside any other state and local taxes you paid during the year.
- Keep your closing documents and basis-tracking records for at least three years after the year of the sale. Per IRS Publication 530, you should keep records that allow you to calculate your home’s adjusted basis at any future sale date. Retain your Closing Disclosure or HUD-1, all basis-adjustment records, and any Form 1098 received at closing. Per IRC Section 6501, retain records supporting current-year deductions for at least three years from the filing date.
Common mistakes when deducting closing costs
The most common error is attempting to deduct the full amount of closing costs as mortgage interest or as a lump-sum expense. Per IRS Publication 530, the only deductible closing costs are qualifying points, per diem interest, and the buyer’s property tax proration.
Title fees, appraisals, recording charges, and transfer taxes are not deductible; they are basis-adding costs that reduce capital gain at sale, not current deductions.
A related mistake is deducting all points in the year paid on a refinance. Per IRS Publication 530, points paid to refinance an existing mortgage on your main home must generally be deducted over the life of the loan, not in the year paid. The exception, deducting points in full in the year paid, applies only to original purchase loans for the main home that meet all nine IRS tests. A filer who deducts full refinance points in year one is overstating their deduction.
- Missing the ongoing annual deduction for unamortized points: Filers who refinanced and are amortizing points over the loan term must remember to claim the annual deductible portion each year. Per IRS Publication 530, a 30-year loan with $3,000 in points generates a deduction of $100 per year for each of the 30 years of the loan. Missing this annual deduction understates itemized deductions every year the mortgage is outstanding.
- Forgetting to deduct remaining points when a loan is paid off or refinanced again: Per IRS Publication 530, if you pay off a mortgage early, by selling the home, refinancing again, or paying off the loan, any remaining unamortized points become fully deductible in the year the loan ends. Filers who sell a home without claiming the remaining balance of unamortized points from a prior refinance leave money on the table.
- Adding deductible items to basis instead of deducting them: Real estate taxes prepaid at closing are deductible in the year paid, they are not a basis-adding cost. Similarly, per diem interest at closing is a current deduction. Homeowners who add these items to basis instead of deducting them understate their Schedule A deductions and overstate their cost basis.
Pro tip: Homeowners who paid points on a refinance and have been deducting them annually should track the remaining unamortized balance every year. When the home is eventually sold or the loan is paid off early, all unamortized points become deductible in that final year. For a homeowner who refinanced five years ago, paid $4,500 in points on a 30-year loan, and has been deducting $150 per year, the remaining $3,750 in unamortized points becomes fully deductible in the year the loan ends, either through sale, payoff, or a subsequent refinance. Missing this deduction at sale is one of the most overlooked closing cost tax benefits for homeowners.
The non-deductible costs that add to basis do eventually produce a tax benefit, just not in the year of purchase. A homeowner who paid $5,000 in title fees and recording costs at closing has a cost basis $5,000 higher than the purchase price alone, which reduces taxable capital gain by $5,000 when the home is sold, assuming the gain is not fully excluded under the Section 121 exclusion.
Key takeaways
- Most closing costs are not tax deductible. Per IRS Publication 530, only qualifying mortgage points, per diem interest paid at settlement, and the buyer’s share of real estate taxes are deductible, and only for itemizers on Schedule A.
- Mortgage points are fully deductible in the year paid only on a purchase loan for the filer’s main home that meets all nine IRS tests in Publication 530. Points on refinance loans and second homes must generally be amortized and deducted ratably over the life of the loan.
- Non-deductible closing costs, title insurance, appraisal fees, attorney fees, recording fees, and transfer taxes, are added to the home’s adjusted cost basis. This reduces taxable capital gain when the home is eventually sold, even though no current deduction is available.
- Any unamortized points on a refinance mortgage become fully deductible in the year the loan is paid off, refinanced again, or the home is sold. Tracking the remaining balance of unamortized points and claiming this deduction in the year the loan terminates is one of the most commonly missed closing cost deductions.
Frequently asked questions about deducting closing costs
Can you deduct closing costs without itemizing?
No. All deductible closing costs, qualifying mortgage points, per diem interest, and prepaid property taxes, require itemizing on Schedule A (Form 1040). Standard deduction takers receive no current-year federal tax benefit from any closing costs, though non-deductible costs that add to basis still reduce taxable gain at sale regardless of filing method.
Are closing costs deductible for a rental property?
Not as a current deduction in the way they are for a personal home. Per IRS Publication 527, mortgage interest and property taxes on a rental property are deductible on Schedule E. Other closing costs, title fees, recording fees, and loan origination costs, are capitalized as part of the rental property’s cost basis and recovered through depreciation over the property’s useful life, not deducted in the year of purchase.
What records do you need to deduct closing costs?
Retain your Closing Disclosure or HUD-1 settlement statement showing each charge at closing, Form 1098 from the lender if mortgage interest or points are reported on it, and a basis-tracking log showing which closing costs were deducted versus added to basis.
For rental properties, keep depreciation schedules reflecting the capitalized closing costs. Per IRC Section 6501, retain deduction records for at least three years from the filing date; retain basis records for at least three years after the year in which the home is sold.
What closing costs add to your home’s adjusted basis?
Per IRS Publication 530, costs that add to basis include title insurance, legal fees for title search or preparing the deed, recording fees, surveys, transfer taxes you pay as the buyer, and certain other settlement costs not otherwise deductible. These amounts increase your home’s adjusted basis and reduce taxable capital gain when the property is eventually sold. They do not produce a tax deduction in the year of purchase.
If you are unsure which items on your closing statement are immediately deductible versus basis-adding, or whether the points on your refinance qualify for full-year-one deduction versus amortization, a tax professional can review your settlement statement. SuperMoney’s tax preparation services comparison includes CPAs and enrolled agents experienced in homeowner tax deductions. Homeowners who also have a home equity loan or HELOC should review how home equity interest deductibility works alongside the points and mortgage interest rules.
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Disclaimer:The information on this page is for general educational purposes only and does not constitute tax, legal, or financial advice. Tax laws are subject to change and vary based on individual circumstances. The content reflects IRS rules as of the date this article was last updated and may not account for recent legislative or regulatory changes. SuperMoney is not a licensed tax advisor, and nothing on this page creates an advisor-client relationship. Consult a licensed CPA or tax professional for guidance specific to your situation.
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