Most closing costs are not tax deductible. On a typical home purchase, only a short list of fees on your Closing Disclosure produces an immediate write-off: prepaid property taxes, prepaid mortgage interest, and mortgage points. Mortgage insurance premiums and the VA funding fee also qualify for eligible borrowers starting in 2026. Every one of these deductions requires you to itemize. So the honest answer to whether closing costs are tax deductible is: a few are, most aren’t, and several of the rest quietly help you later by raising your home’s cost basis.
You Have to Itemize for Any of This to Matter
Every deduction below lives on Schedule A. If your itemized total doesn’t beat the standard deduction, none of these fees will save you a dollar. For 2026, the standard deduction is $32,200 for married couples filing jointly, $16,100 for single filers, and $24,150 for heads of household.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Roughly 90% of taxpayers take the standard deduction.
The year you buy is often the exception. Property taxes, mortgage interest, points, and state income taxes stacked into a single year frequently push a new homeowner over the threshold. Run the numbers both ways before you file.
Prepaid Property Taxes and Prepaid Mortgage Interest
Two closing-line items are deductible in the year you buy.
The first is prepaid real estate taxes. At closing you usually either reimburse the seller for the portion of the year’s property tax bill that covers your ownership or prepay your own share. That amount is deductible as a state and local tax, but it falls under the SALT cap. For 2026, SALT is limited to $40,000 combined across state and local income, sales, and property taxes ($20,000 if married filing separately), with a floor of $10,000 regardless of income.2Internal Revenue Service. Topic No. 503, Deductible Taxes A phase-out kicks in above $505,000 in modified adjusted gross income. If your state income taxes already max out the cap, the prepaid property taxes at closing add nothing.
The second is prepaid mortgage interest, sometimes called per diem interest. Your first regular payment isn’t due until roughly a month after closing, so the lender collects interest at the table to cover the days between closing and the end of that month. It’s deductible on the same terms as any other home mortgage interest and shows up in Box 1 of your Form 1098.3Internal Revenue Service. Form 1098 – Mortgage Interest Statement
The mortgage interest deduction applies to the first $750,000 of acquisition debt, or $375,000 if married filing separately. Loans taken out before December 16, 2017 keep the older $1 million limit.4Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction
Mortgage Points
Points are prepaid interest you pay to buy down your rate. One point equals 1% of the loan amount. Whether you deduct them all at once or slowly depends on what kind of loan you took.
Points Paid on a Home Purchase
Points paid to buy, build, or improve your main home can be deducted in full in the year you pay them if all of the following hold:5Internal Revenue Service. Topic No. 504, Home Mortgage Points
- Paying points is an established local practice in your area.
- The points are calculated as a percentage of the loan principal.
- You bring at least as much money to closing (down payment plus other funds) as the points cost, and you don’t cover the points with money borrowed from the lender.
- The amount appears clearly as points on your settlement statement.
- The mortgage is secured by your main home.
Miss one of those and you can still deduct the points, but you have to spread the deduction across the life of the loan.
Points on a Refinance
Points paid on a refinance or a home equity loan can’t be written off in a single year. You deduct them evenly over the loan term. Pay $6,000 in points on a 30-year refinance and you deduct $200 per year.5Internal Revenue Service. Topic No. 504, Home Mortgage Points
If you pay off that refinanced loan early, or refinance again with a different lender, you can deduct the entire remaining unamortized balance in the year of payoff. This is one of the most overlooked deductions in real estate. It does not apply if you refinance with the same lender, so read the paperwork on the new loan carefully.6Internal Revenue Service. Real Estate Taxes, Mortgage Interest, Points, Other Property Expenses
Seller-Paid Points
If the seller pays your points as part of the deal, the IRS treats them as if you paid them yourself, so you still get the deduction. The trade-off: you reduce your home’s cost basis by that same amount, which can slightly increase your capital gain when you sell.5Internal Revenue Service. Topic No. 504, Home Mortgage Points
Mortgage Insurance Premiums
If you put less than 20% down, you probably pay private mortgage insurance on a conventional loan or mortgage insurance premiums on an FHA loan. The deduction for those premiums expired and was renewed repeatedly over the years. For 2026, it’s back: the One, Big, Beautiful Bill Act reinstated the mortgage insurance premium deduction for contracts issued after 2006.7Internal Revenue Service. One, Big, Beautiful Bill Provisions
Income limits apply. For married couples filing jointly, the deduction starts phasing out at $100,000 in modified adjusted gross income and disappears at $109,000. For married filing separately, those thresholds are $50,000 and $54,500. FHA borrowers often pay a large upfront MIP at closing, so check your Closing Disclosure to make sure that figure is captured. The Form 1098 from your lender may not include the upfront portion.
VA Funding Fee
Beginning in 2026, veterans, service members, and surviving spouses using a VA-guaranteed home loan can deduct the VA funding fee. It’s a one-time charge running from 0.5% to 3.3% of the loan amount depending on the loan type, down payment, and prior use of the VA loan benefit.8VA News. Home Loan Borrowers Can Now Deduct Funding Fees On a $400,000 loan that can mean anywhere from $2,000 to more than $13,000. You can pay it at closing or roll it into the loan balance.
Fees That Add to Your Home’s Cost Basis
Plenty of closing costs can’t be deducted now but still help you at tax time. They get added to your cost basis, which is what the IRS subtracts from your sale price to figure your taxable gain when you sell. Higher basis, smaller gain.
These settlement charges go into basis:9Internal Revenue Service. Publication 530 – Tax Information for Homeowners
- Abstract and title search fees
- Legal fees for the title search, sales contract, and deed preparation
- Owner’s title insurance
- Recording fees
- Survey costs
- Transfer or stamp taxes
- Charges for installing utility services
- Any seller obligations you agreed to pay, such as back taxes or repair costs
A useful test: if you would have had to pay the fee even if you bought the home with cash, it’s a cost of acquiring the property and belongs in basis.9Internal Revenue Service. Publication 530 – Tax Information for Homeowners Because gain on the sale of a primary residence is partly excluded from tax, many homeowners never owe capital gains at all.10Internal Revenue Service. Topic No. 701, Sale of Your Home Basis matters most in expensive markets, long holds, and gains that approach the exclusion.
Closing Costs That Give You Nothing
Some fees provide no tax benefit at any point. They can’t be deducted and they don’t go into basis. The IRS classifies them as either personal expenses or costs of getting a loan:9Internal Revenue Service. Publication 530 – Tax Information for Homeowners
- Homeowner’s insurance premiums (fire, hazard, comprehensive) are personal living expenses.
- Loan-related fees such as appraisal charges, credit report costs, and loan assumption fees.
- Rent or utility charges for occupying the home before closing.
- HOA fees and utility deposits, which are ongoing living costs.11Internal Revenue Service. Tax Benefits for Homeowners
Title insurance trips people up. Owner’s title insurance goes into basis. Lender’s title insurance, which protects the bank rather than you, does not.
Refinancing Follows Different Rules
Refinancing is not a purchase, so most acquisition-related rules don’t apply. Points on a refinance are deductible only across the life of the new loan, as described above. The narrow exception: if part of the proceeds funds home improvements, the portion of the points tied to that improvement money can be deducted in the year you pay it.5Internal Revenue Service. Topic No. 504, Home Mortgage Points
Most other refinance closing costs, including appraisal, attorney, and title search fees, are not deductible. They also can’t be amortized or added to basis.12Internal Revenue Service. IRS Tax Tip – Refinancing Your Home Those same fees would have raised basis if paid on a purchase; on a refinance they deliver nothing.
Records to Keep
Your Closing Disclosure (or the older settlement statement) is the document that supports every deduction here and every basis adjustment down the road. Hang on to it for as long as you own the home and for at least three years after you file the return for the year you sell.13Internal Revenue Service. Topic No. 305, Recordkeeping
Keep every Form 1098 the lender sends over the life of the loan, along with receipts for any improvements. Improvements also add to basis, and closing costs plus improvement records accumulated across decades of ownership can add up to real savings when you sell. Lose the paperwork and you lose the ability to prove the higher basis if the IRS questions your reported gain.