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Deduct Closing Costs on Taxes?

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  • Deduct Closing Costs on Taxes?

    Taxguykarl or others who prepare tax returns might be able to answer this better, but from a quick google search, it doesn't seem like this is actually a thing.

    I got a call this morning from a former customer wanting to know what her closing costs were when she bought her house. I wasn't able to help her because she paid off the loan 15 years ago. I explained that we only keep paid loans six years. She asked the common question, "Where do I go to get this information?" You can't. We destroyed the file. If you don't have your copy, no one has it.

    She said she sold her house last year, and her tax preparer told her she can deduct her closing costs from the purchase of her house. Which doesn't seem right to me. I didn't say it to her, but I think it's a miscommunication. Either they meant she can deduct costs from selling her house, or maybe closing costs from the purchase of her new house. But I'm not a tax preparer - what do I know?
    "I look at the stars. It's a clear night and the Milky Way seems so near. That's where I'll be going soon. "We are all star stuff." I suddenly remember Delenn's line from Joe's script. Not a bad prospect. I am not afraid. In the meantime, let me close my eyes and sense the beauty around me. And take that breath under the dark sky full of stars. Breathe in. Breathe out. That's all."
    -Mira Furlan

  • #2
    I'm no tax professional either, but I can't imagine being able to deduct an expense from 15 years ago on current year taxes. I'd think that deduction would only apply in the year of that expense.
    "Crazy may always be open for business, but on the full moon, it has buy one get one free specials." - WishfulSpirit

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    • #3
      As a *thinking* layman, I'd put money on miscommunication. Something from 15 years ago isn't generally going to be anything relevant to current taxes. Closing costs on that mortgage would be further back than that, at least 5 more years, putting it well past even the oddball examples I've heard of things rolling on for.

      The NEW house, yes, there's bound to be LOTS of stuff to deduct. Any repairs that she paid someone to do in the last year, yes. The starting costs on the old house, nope. That's just a really good way to get nasty audit results.

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      • #4
        You can deduct points paid to lower your interest rate. It is basically viewed as paying interest in advance.
        Life is too short to not eat popcorn.
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        • #5
          Sorry I've been away.
          Now onto the question at hand: Yes some of the nickel-and-dime fees on a closing statement are deductible points (Schedule A, Line 8c). They would be deductible for the year of the purchase.
          Yes, amended returns are an option, but only for three years back.
          For the SC in the OP, way too late--too bad, so sad, sucks to be you.
          I'm trying to see things from your point of view, but I can't get my head that far up my keister!

          Who is John Galt?
          -Ayn Rand, Atlas Shrugged

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          • #6
            Yeah. It sounds to me like it was a miscommunication. I'm a little surprised that she thought she could deduct closing costs from 15+ years ago, but then I've heard stranger things.
            "I look at the stars. It's a clear night and the Milky Way seems so near. That's where I'll be going soon. "We are all star stuff." I suddenly remember Delenn's line from Joe's script. Not a bad prospect. I am not afraid. In the meantime, let me close my eyes and sense the beauty around me. And take that breath under the dark sky full of stars. Breathe in. Breathe out. That's all."
            -Mira Furlan

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            • #7
              Quoth Ghel View Post
              I'm a little surprised that she thought she could deduct closing costs from 15+ years ago, but then I've heard stranger things.
              So have I
              I'm trying to see things from your point of view, but I can't get my head that far up my keister!

              Who is John Galt?
              -Ayn Rand, Atlas Shrugged

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              • #8
                Karl - While I haven't had to take advantage of this (*whew*), I was always under the impression that you have three years to file a (late) return, but that, once you have, you can theoretically amend it for an indefinite period of time after that. Is this not the case?
                "For a musician, the SNES sound engine is like using Crayola Crayons. Nobuo Uematsu used Crayola Crayons to paint the Sistine Chapel." - Jeremy Jahns (re: "Dancing Mad")
                "The difference between an amateur and a master is that the master has failed way more times." - JoCat
                "Thinking is difficult, therefore let the herd pronounce judgment!" ~ Carl Jung
                "There's burning bridges, and then there's the lake just to fill it with gasoline." - Wiccy, reddit
                "Retail is a cruel master, and could very well be the most educational time of many people's lives, in its own twisted way." - me
                "Love keeps her in the air when she oughta fall down...tell you she's hurtin' 'fore she keens...makes her a home." - Capt. Malcolm Reynolds, "Serenity" (2005)
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                • #9
                  I know that when I discovered that H&R Block had screwed up 5 years worth of returns, the accountant they brought in to fix things said he could only refile the three previous years.

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                  • #10
                    Quoth EricKei View Post
                    I was always under the impression that you have three years to file a (late) return,
                    You can file up to three years late (not recommended). If you owe for that year, you are on the hook for interest and penalties. If you have a refund coming, there is no interest to you. In past years, the IRS put out a press release in late March about refunds that will revert to the US Treasury if a return claiming those is not filed--those would be for the returns due three years earlier.
                    Quoth EricKei View Post
                    ... once you have [filed], you can theoretically amend it for an indefinite period of time after that. Is this not the case?
                    Not the case, sorry. Amended returns can only be filed for three years.
                    I'm trying to see things from your point of view, but I can't get my head that far up my keister!

                    Who is John Galt?
                    -Ayn Rand, Atlas Shrugged

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                    • #11
                      Mkay. Thanks!
                      "For a musician, the SNES sound engine is like using Crayola Crayons. Nobuo Uematsu used Crayola Crayons to paint the Sistine Chapel." - Jeremy Jahns (re: "Dancing Mad")
                      "The difference between an amateur and a master is that the master has failed way more times." - JoCat
                      "Thinking is difficult, therefore let the herd pronounce judgment!" ~ Carl Jung
                      "There's burning bridges, and then there's the lake just to fill it with gasoline." - Wiccy, reddit
                      "Retail is a cruel master, and could very well be the most educational time of many people's lives, in its own twisted way." - me
                      "Love keeps her in the air when she oughta fall down...tell you she's hurtin' 'fore she keens...makes her a home." - Capt. Malcolm Reynolds, "Serenity" (2005)
                      Acts of Gord – Read it, Learn it, Love it!
                      "Our psychic powers only work if the customer has a mind to read." - me

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                      • #12
                        A thought on how closing costs from 15 years ago could be relevant to this year's taxes:

                        As I understand it, if you sell your house for more than you paid for it, you owe taxes on that profit. Perhaps closing costs count as part of the purchase price? So you need them to compute how much profit was made?

                        I'm just guessing.

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                        • #13
                          Quoth SpyOne View Post
                          As I understand it, if you sell your house for more than you paid for it, you owe taxes on that profit. Perhaps closing costs count as part of the purchase price? So you need them to compute how much profit was made?
                          The "profit" as you call it is a capital gain. The points, as well as any expenses to fix up the house prior to selling (and the original purchase price and realtor's fees) are part of the basis for this calculation.
                          If the capital gain on a primary residence is less than $250,000 ($500,000 for married filing jointly) there is no federal tax on that gain--some states on the other hand. Yes even if the capital gain is not spent on a new home (there is also no deduction if that is sold at a loss). These sales must be reported even if there is taxable income resulting.
                          Keep in mind that this only applies to primary residence, selling rental property is just like selling stock....the tax implications anyway.
                          I'm trying to see things from your point of view, but I can't get my head that far up my keister!

                          Who is John Galt?
                          -Ayn Rand, Atlas Shrugged

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