If I Bought a House in December, Can I Claim It on My Taxes?

If you bought a house in December, the tax deductions you can claim this year are limited to costs you actually paid between closing day and December 31: mortgage points, the prepaid interest and prorated property taxes on your Closing Disclosure, and whatever mortgage interest accrued in those final weeks. Those amounts only translate into an actual tax break if they push your total itemized deductions above the standard deduction, which for 2026 is $32,200 for married couples filing jointly, $16,100 for single filers, and $24,150 for heads of household.¹

What You Can Deduct From a December Closing

Your Closing Disclosure is the document to pull out first. It itemizes every settlement charge, and three lines on it produce first-year deductions.

Mortgage Points

Points are upfront fees paid to lower your interest rate, and the IRS treats them as prepaid interest. If you paid points on a loan to buy your primary residence, you can generally deduct the full amount in the year of purchase rather than spreading it across the loan term.² To take the full deduction in year one, all of the following must be true: the loan is secured by your main home; paying points is standard practice in your area; the amount charged is not more than the local norm; the points represent actual interest rather than a repackaged fee for appraisal or title work; the cash you brought to closing (down payment, earnest money, escrow deposits) was at least equal to the points charged; the loan is for purchase or construction rather than a refinance; and the points are shown on the settlement statement as a percentage of the loan.³

Points on a second home or a refinance follow different rules and generally have to be spread over the life of the loan.³

Prepaid Interest

Lenders collect interest at closing for the days between your closing date and the end of that month, so your first regular payment can start clean the following month.⁴ For a December 20 closing, that’s roughly 11 days of interest. Modest in dollar terms, but fully deductible as mortgage interest for the year.

Prorated Property Taxes

Property taxes get split at closing based on who owned the home on which days of the tax period. You can deduct only the days you owned it. Close on December 15, and you deduct property taxes for December 15 through December 31.⁵ The allocation follows ownership dates, not who physically sent money to the tax collector.

Mortgage Interest Through Year-End

Any mortgage interest that accrued between closing and December 31 is deductible for the year. Your lender will send Form 1098 in January reporting the total.⁶ For a late-December closing, that figure will be small — often just a partial month, since your first regular mortgage payment usually doesn’t land until February.

Whether Itemizing Actually Pays Off in Year One

Homeownership deductions only reach your return if you itemize on Schedule A instead of taking the standard deduction.⁷ Itemizing is only worthwhile when your total qualifying expenses beat the standard deduction for your filing status.

This is where December closings get difficult. Two or three weeks of mortgage interest and a partial-month slice of property taxes is a thin foundation for clearing $32,200, or even $16,100. You usually need substantial deductions from elsewhere on Schedule A to get over the line: state and local taxes, charitable contributions, and qualifying medical expenses all feed in. Points can help — a large point payment on a big loan can be a real number — but for many December buyers the totals still fall short, and taking the standard deduction is the better move.

If that happens, you don’t lose the house. You lose the first-year tax benefit of those specific housing costs, which is a different thing. The math almost always shifts in year two, when you have twelve full months of mortgage interest and property taxes stacked up.

Closing Costs That Don’t Deduct but Still Matter

A lot of what you paid at closing isn’t deductible at all. Some of it, though, gets added to your home’s cost basis, which reduces the taxable gain whenever you eventually sell. Per IRS Publication 530, these settlement costs increase basis:⁵

Legal fees, including title search and preparation of the sales contract and deed
Owner’s title insurance
Recording fees
Transfer or stamp taxes
Survey costs
Abstract of title fees

Another set of costs is neither deductible nor added to basis. These are simply sunk costs for tax purposes:

Lender-required appraisal fees
Credit report fees
Loan assumption fees
Fire and hazard insurance premiums
Rent or utility charges for occupying the home before closing

Keep the Closing Disclosure regardless. When you sell, the exclusion under Section 121 lets a single filer exclude up to $250,000 of gain and a married couple filing jointly up to $500,000, provided you owned and lived in the home for at least two of the five years before the sale.⁸ Basis additions from closing shrink the gain that has to fit inside the exclusion.

What Changes in Year Two

Year two is when the ongoing homeowner deductions come into their own. A full year of mortgage interest, reported on Form 1098, is typically the largest of them. For mortgages taken out after December 15, 2017, you can deduct interest on up to $750,000 of loan principal ($375,000 if married filing separately); loans originated before that date remain under the older $1 million limit.³

Property taxes paid across the full year — directly or through your servicer’s escrow account — are deductible under the state and local tax deduction. For 2026, the SALT cap is $40,400 ($20,200 for married filing separately), well above the $10,000 cap that applied in earlier years. The cap phases down for households with modified adjusted gross income above $500,000 ($250,000 married filing separately), dropping 30 cents for every dollar of income over the threshold, but never falling below $10,000.

Mortgage insurance premiums are back in play too. Starting in tax year 2026, PMI and FHA mortgage insurance premiums are treated as deductible mortgage interest under a permanent provision of the One Big Beautiful Bill Act. The deduction phases out between $100,000 and $109,000 of adjusted gross income ($50,000 to $54,500 for married filing separately) and is unavailable above those ceilings. Separately, once your loan balance reaches 80% of the home’s original value, you can request PMI cancellation, and it terminates automatically at 78%.⁹

Documents to Keep Starting Now

The paperwork habits you set in your first weeks as a homeowner pay off for as long as you own the place.

Closing Disclosure. Your key tax document for the first year, showing points, prepaid interest, prorated property taxes, and every settlement charge by category.
Form 1098. Arrives from your lender by the end of January. For a December closing, the first one will show small numbers; that is expected.¹⁰
Property tax records, including the closing proration and, later on, escrow account statements.
Mortgage insurance statements, if you pay PMI or MIP.
Receipts for capital improvements — contractor invoices, permits, materials — since substantial improvements that add value, extend the home’s life, or adapt it for a new use also increase your basis. Routine repairs like painting or fixing a faucet do not.

The IRS can audit a return for up to three years after filing, and basis questions can resurface decades later when you sell. A folder started on closing day, even if the first-year deduction turns out to be too small to itemize around, is the version of yourself that thanks you when the sale finally happens.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill
2
Office of the Law Revision Counsel. 26 USC 461 – General Rule for Taxable Year of Deduction
3
Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction
4
Consumer Financial Protection Bureau. What Are Prepaid Interest Charges?
5
Internal Revenue Service. Publication 530 (2025), Tax Information for Homeowners
6
Internal Revenue Service. Instructions for Form 1098 (12/2026)
7
Internal Revenue Service. About Schedule A (Form 1040), Itemized Deductions
8
Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
9
Consumer Financial Protection Bureau. When Can I Remove Private Mortgage Insurance (PMI) From My Loan?
10
Internal Revenue Service. Form 1098 (Rev. April 2025) Mortgage Interest Statement