So you’ve bought a house. Like most people, you’re probably confused about how to put all those closing costs on your tax return. As you probably know, these costs are divided between you and the seller according to the sales contract, local customs, or the understanding of the parties. If you built your home, you probably paid these costs when you bought the land or paid off your mortgage.

The only settlement or closing costs on your primary residence that you can deduct are home mortgage interest and property taxes. Both are not technically closing costs, but you paid them at closing. You deduct them in the year you buy your home if you itemize your deductions.

What about the other closing costs? These include all those dreaded “fees” they charge you; closing fees, title fees, HOA fees, etc. The bad news is that they are NOT tax deductible. These fees are basically the expenses you paid to purchase your home.

However, they are added to your home’s taxable income. The following are items that you can add to the foundation of your home:

* Abstract fees (abstract of title fees).

* Charges for installation of public services.

* Legal fees (including fees for title search and preparation of sales contract and deed).

* Recording fees.

* Surveys.

* Transfer taxes.

* Owner’s title insurance.

* Any amounts the seller owes and you agree to pay, such as back taxes or interest, recording or mortgage fees, costs of improvements or repairs, and sales commissions.

You will see the tax benefits of the above charges once you sell your primary residence. At that point, you’ll take the purchase price and add the above costs to your taxable income to determine the gain or loss on the sale of your home.

Other closing costs that are deductible include prorated property taxes and points. You can get information about prorated property taxes at www.real-estate-owner.com/1031-exchange. You can get information about points at www.real-estate-owner.com/points.

There are items that the IRS does not allow you to deduct as closing costs. Below are examples of closing costs that you absolutely cannot deduct or adjust to your taxable income:

1. Fire insurance premiums.

2. Charges for the use of utilities or other services related to the occupancy of the dwelling prior to closing.

3. Rent for occupying the home before closing.

4. Fees related to obtaining or refinancing a mortgage loan, such as:

has. FHA or other mortgage insurance premiums and VA financing fees,

b. loan assumption fees,

against Cost of a credit report, and

d. Fee for an appraisal required by a lender.