If you're in the process of buying a home, saving money any way you can is a good idea. Fortunately, you will be able to recoup some of your closing costs at tax time because you can deduct some of them on your taxes. So, what closing costs are tax deductible? Here's what you need to know before you do your taxes after buying a home.
Property Taxes
When you buy a house, you're expected to pay a portion of your property taxes at closing. But you can then deduct the amount you paid when you're ready to file your taxes. Just make sure you use the 1040 form from the IRS to itemize this and other deductions during tax time.
Mortgage Interest
Your first mortgage payment is usually not due for at least one month after you buy a house. But you still have to prepay interest on the loan, and what you pay is tax deductible. So if you close on your house on September 15, you have to pay 15 days of mortgage interest for the rest of the month, and you can then deduct that amount as soon as you do your taxes.
Points
Many people pay for points when buying a house because they end up with a lower interest rate by doing this. If you end up paying points in the process of getting your loan, you can deduct this cost on your taxes. This way, you can save in the long run with your lower interest rate and then get back some of your money now by deducting the cost on your tax return.
Now that you're aware of what closing costs are tax deductible, you can rest assure that you'll benefit financially from buying a new home sooner than you thought. If you have any questions about the closing process or need help buying a new home, contact Contour Mortgage today.
