Most closing costs aren't immediately deductible, but some, like prepaid mortgage interest and property taxes, are; others, like appraisal or title fees, get added to your home's cost basis to reduce future capital gains, while deductible items usually go on Schedule A (Form 1040). You'll need to keep all closing documents to determine what's deductible and what isn't when you file your taxes.
Closing Costs Deductions
Those costs include title insurance premiums, document preparation fees, appraisal costs, mortgage insurance, homeowner association dues, utilities and homeowner's insurance premiums. The mortgage points mentioned above, which are tax deductible, are included in your closing costs.
Many business expenses are 100% deductible, including advertising, employee wages, rent, supplies, and certain business meals like company parties or meals for the public, while personal deductions like student loan interest or charitable donations (depending on the type) can also be fully deductible for individuals. The key is that the expense must be "ordinary and necessary" for your trade or business or meet specific IRS criteria, often differentiating from the 50% rule for client meals.
Most closing costs, like title insurance, homeowner's insurance, and inspection fees, are not tax deductible. But there are a few exceptions. Mortgage interest: You can deduct any mortgage interest you paid at closing, as well as throughout the life of the loan.
“Abstract fees, utility fees, legal fees, recording fees, surveys, transfer taxes and title insurance are not tax-deductible,” says Eric Bronnenkant, a CPA and head of tax/director of tax advisory and planning for Edelman Financial Engines. “But they can be added to your basis price when it's time to sell your home.”
Taxpayers must itemize their deductions to deduct homeownership expenses. Homeowners can't deduct any of the following items: Insurance including fire and comprehensive coverage and title insurance. The amount applied to reduce the principal of the mortgage.
The $20,000 limit under the measures applies on a per asset basis, so small businesses can instantly write off multiple assets. Assets valued at $20,000 or more can continue to be placed into the small business pool and depreciated at 15% in the first income year and 30% each income year after that.
Typically, the only closing costs that are tax-deductible are payments toward mortgage interest, buying points, or property taxes. Other closing costs are not, such as: Abstract fees.
The First-Time Homebuyer Tax Credit is equal to 10 percent of the home's purchase price, capped at a maximum dollar amount set by law. In 2025, the maximum credit is $15,000 for most buyers, or $7,500 if you are married and file taxes separately.
The "$1000 instant tax deduction" refers to a proposed Australian tax policy, specifically from the Albanese Labor government in 2025, allowing eligible workers to claim a flat $1,000 deduction for work-related expenses without needing receipts, simplifying tax returns for those with lower expenses but potentially costing those with higher expenses, starting from 1 July 2026. It's an option to replace itemised work-related deductions, not an extra refund, and doesn't affect non-work-related deductions like charity.
Taxpayers often make common tax mistakes by omission: not keeping records. If the IRS comes a-knockin', don't be scrambling to compile your records. File or scan and store home office and home improvement receipts and other home-related documents as you go. #7 Forgetting to Report Trackable Capital Gains.
A recent tax law ("One Big Beautiful Bill") introduced a new $6,000 bonus deduction for Americans aged 65 and older, available for tax years 2025-2028, reducing taxable income, not the tax itself, with income phase-outs starting at $75,000 MAGI for singles and $150,000 for joint filers. This deduction adds to existing standard deductions, provides up to $12,000 for couples, and requires a Social Security number and filing status other than Married Filing Separately.
The main tax breaks for buying a house are deducting mortgage interest (on up to $750k debt for newer loans) and property taxes, plus potential deductions for "points" (prepaid interest) and capital gains exclusion when selling, though there's no federal first-time homebuyer tax credit currently active; you must itemize deductions (not take the standard deduction) to benefit, with lender Form 1098 helping report interest paid.
The following are good options for your tax money, and should be the top priorities for your refund.
Additional key tax refund statistics
The average tax refund in 2022 for someone making between $50,000 and $75,000 was $2,712. The average tax return for someone making between $100,000 and $199,999 was $4,106.
Misspelled names. Likewise, a name listed on a tax return should match the name on that person's Social Security card. Entering information inaccurately. Wages, dividends, bank interest, and other income received and that was reported on an information return should be entered carefully.
The IRS doesn't have a specific dollar limit for hobby income; instead, it focuses on profit motive: if you intend to make a profit, it's a business, but if it's for fun, it's a hobby, and you must report all income but can't deduct losses. Key is that you report all hobby income on Form 1040 as "other income," and if net earnings from self-employment are $400 or more, you owe self-employment tax, even if it's a side gig. The main difference from business is that you can't deduct hobby expenses (under current law) and must report all profits.
The IRS allows taxpayers to deduct up to $3,000 of realized investment losses ($1,500 if married filing separately) against ordinary income each year. This deduction applies only to losses in taxable investment accounts and must be realized by December 31st to count for that tax year.
The section 179 deduction allows taxpayers, other than trusts and estates, to elect to expense a specified amount of the cost of qualifying property purchased for use in a business. For tax years beginning in 2026 the maximum deduction is $2,560,000, (2025, the maximum deduction is $2,500,000).