The Real Estate Encyclopedia
Which Closing Costs Are Tax Deductible?
Category - Home Selling Questions - Selling Legal & Closing FAQ's

Although the following information should prove helpful, it is not intended as tax advice. In addition, tax laws change continually, so seek the advice of your tax professional for complete tax advice.


Financial closing costs are paid by both the buyer and the seller. In some areas, custom or tradition calls for the seller to pay for certain expenses and the buyer to pay for others or the contract may have been negotiated asking the seller to assume a portion or all of the closing costs.  One way to minimize closing expenses is to negotiate some of them as part of the purchase offer. Some fees are set by law, and therefore are not negotiable. Others are set by the local real estate, financial markets, and may be more flexible.  Your tax adviser should be able to help you identify the most advantageous approach to closing on your home.


While Realtors' commissions, lawyers' fees, and other closing costs are no longer deductible, these costs can reduce capital gains by adding to the cost basis or reducing the adjusted sale price, so it might be advantageous for both the seller and buyer to negotiate the best way to approach the question of closing costs while enrolling the guidance of tax advisers and the lender involved in the transaction. See IRS Publication 530, "Tax Information for Homeowners."

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