Closing costs that you’d normally write off for your personal residence are deductible for a rental home as well. For instance, you can write off prepaid mortgage interest and prorated property taxes.
"Closing costs" is an umbrella term for the various fees, charges and taxes that are due at closing. Some of these closing costs are deductible on your federal income taxes.
Closing Costs The one-time home purchase costs that are tax deductible are mortgage interest paid, real estate taxes, and some loan origination fees (a.k.a. points) applicable to a mortgage of $750,000 or less. But you’ll only want to itemize them if all your deductions total more than the standard deduction.
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and she could always make a small tax-deductible donation to charity to wipe out any small amount of tax that may become.
When we sold our home in 2004 part of the contract was for us, the sellers, to absorb half of the closing costs. Can we claim that on our taxes since we were the sellers? answer: karen – They are not.
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Instead of being deductible, closing costs are added to your basis in the rental property. Your basis in property is generally equal to its sale price, the cost of improvements you make and closing costs. Such costs may include abstract, legal and recording fees, transfer taxes, title taxes and back property taxes of the previous owner.
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To deduct seller-paid closing costs, the buyer must use the itemization method. It is the optimal way to deduct if the amount of closing costs paid on the buyer’s behalf exceed the standard deduction. For example, in 2012, the standard deduction for a single individual is $5,950 and $11,900 for married couples filing jointly.
The one-time home purchase costs that are tax deductible as closing costs are real estate taxes charged to you when you closed, mortgage interest paid when you settled, and some loan origination fees (a.k.a. points) applicable to a mortgage of $750,000 or less.
The only deductible closing costs are those for interest, and deductible real estate taxes. Other settlement fees and closing costs for buying the property become additions to your basis in the property.