The Real Estate Encyclopedia
Which Homeowner And Mortgage 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.


Three types of mortgage and homeowners costs may be tax-deductible, e.g. discount points, interest paid on a home loan or home equity loan and property taxes. After the year of sale, your mortgage interest and annual property taxes are the only deductible costs. For a refinanced loan, points must be deducted over time. Consult your tax advisor for advice about your situation.


The federal government encourages home ownership by providing income tax advantages such as tax deductions, deferments and exclusions to buyers of homes.  These tax benefits are different for a property used as a principal place of residence than for property purchased for investment purposes.  In general, homeowners may deduct the following from their gross income to reduce their taxable income:


Ø       Mortgage interest payments on first and second homes that meet the definition of “qualified residence interest”

Ø       Real estate property taxes, but not interest paid on overdue taxes

Ø       Certain loan discount points

Ø       Certain loan origination fees

Ø       Loan prepayment penalties

Ø       Casualty losses to the real estate not covered by insurance.


Real property taxes and state and local income and personal property taxes are fully deductible.  In addition, if you sold your property during the year, you may have paid real estate taxes without being aware of it. See closing statement for any prorations.

Home Selling Questions - Selling Legal & Closing FAQ's
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