Are Closing Costs Tax Deductible?

For informational purposes only. Zillow and its affiliates do not provide tax advice. Consult a tax professional for guidance specific to your situation.

Some closing costs — the expenses and fees associated with buying a home — are tax-deductible, while others aren’t. Mortgage points, for example, are typically deductible, but costs like the appraisal fee and deed recording fee aren’t. To help you understand the tax implications of buying a home, here’s what to know about deducting closing costs.

What closing costs are tax-deductible?

Generally, you can deduct some closing costs, such as points paid to reduce your mortgage interest rate. You’ll need to itemize your return in order to take advantage of these deductions.

Discount or mortgage points

Discount or mortgage points are upfront fees you pay to your lender in exchange for a lower interest rate on your mortgage — in effect, a form of prepaying interest. Each point typically costs 1% of your loan amount. Generally, if you paid points on a mortgage used for your primary residence, you can deduct the cost in the year of purchase, provided you meet other IRS requirements. Alternatively, you could choose to deduct them over the life of the loan.

Prepaid interest

Depending on when you close, you’ll likely pay some prepaid interest. This amount covers the days between the closing and the date of your first monthly mortgage payment. For example, if you close on June 20 and your first payment is due August 1, you’d prepay interest for the 11 days remaining in June. (Mortgages are paid in arrears.) This prepaid interest is deductible as mortgage interest on your tax return for the year you bought the home.

Property taxes

Property taxes are levied by local governments based on the assessed value of your property. At closing, property taxes are often prorated between the buyer and seller — if the seller already paid property taxes for the year, the buyer will reimburse the seller for the portion of the year the buyer will own the home. Conversely, if the seller hasn't paid, they may owe the buyer for the period before closing. If you paid property taxes at closing that cover the period you owned the home, you can deduct that on your return.

Beyond prorated property taxes, your mortgage lender might require you to prepay property taxes to fund the escrow account. You can also deduct this, up to IRS limits.

What closing costs are not deductible?

Many closing costs aren’t tax-deductible, including the origination fee, appraisal fee and credit check fee.

Loan origination fee

A mortgage loan origination fee is not tax-deductible. This charge covers the lender’s cost to process, underwrite and fund your mortgage. 

Homeowners and title insurance premiums

You can’t deduct homeowners insurance premiums (paid at closing or otherwise), nor can you deduct the title insurance premium, which protects the lender from defects with the property’s title.

If you opt to buy title insurance for yourself, however — known as an owner’s policy — you can add that cost to the basis of your home, if beneficial. You can also add the title search fee to your basis. The basis is the cost of buying the home plus the cost of any improvements, and it’s used to determine capital gains when you sell. You can reduce your taxable gains if you include certain allowable closing costs in your basis.

Appraisal and other fees

Lenders typically require a home appraisal to determine the value of the property and loan amount, and charge an appraisal fee to the buyer to cover it. This fee is not tax-deductible.

There are also other closing costs that aren’t tax-deductible, including the credit check or credit report fee and any prepaid homeowners association fees.

Mortgage insurance premiums

Mortgage insurance isn’t necessarily a cost paid at closing (though it can be), but it’s an expense nonetheless. Currently, these premiums are not tax-deductible — but that’s changing for tax year 2026. When you file 2026 tax returns in spring 2027, you’ll be able to deduct these premiums, which protect the lender in case you default on your loan.

Recording fees and transfer taxes

Document preparation and deed recording fees aren’t tax-deductible, but you can add these costs to the basis of your home in the future. The same goes for transfer taxes, which is a requirement for home sales in most states. It might save you money to include these costs in your cost basis when you sell.

Real estate agent commissions

Real estate agent commissions are fees paid to the agents who help you buy or sell your home, typically calculated as a percentage of the purchase price. If you paid any portion of the commission at closing, this cost isn’t deductible. You can add it to your home’s cost basis when you sell, however.

Are closing costs on a refinance tax-deductible?

Generally, closing costs on a refinance aren’t fully deductible in the year you pay them. Instead, you can deduct certain allowable costs over the life of the new loan. There are exceptions to this, though, so keep an eye on IRS rules.

Points on a refinance

If you paid points to refinance — the fees you pay upfront to lower your new mortgage interest rate — you can only deduct them over the life of the new loan. That means that instead of deducting the full cost of the points in the year you refinanced, you’ll spread that cost out year to year for as long as you have the mortgage.

Cash-out refinance

If you refinanced and took cash out to pay for home improvements, you can deduct the portion of the points related to the renovations in the year they were paid. Normally, points on a refinance have to be deducted over the life of the loan.

Are closing costs on a second home tax-deductible?

The tax deduction rules for second homes mirror those for primary residences in many ways, but with some crucial distinctions. The tax deductions here apply to second homes as defined by the IRS, not investment or rental properties, which have their own tax rules.

Making the most of your home purchase tax benefits

While navigating closing costs and tax implications can feel overwhelming, remember that homeownership brings numerous long-term financial advantages. Even if you can't deduct most closing costs immediately, they're helping to build value in your property. A tax professional can guide you through deductions and opportunities tailored to your situation, and a qualified lender can be a resource throughout the home buying process. To talk with a loan officer and learn more about your financing options, connect with us at Zillow Home Loans.*

*Zillow Home Loans; an equal housing lender. NMLS #10287