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I just bought a home. What can I deduct from the settlement statement?

If you bought your home, you probably paid settlement or closing costs in addition to the contract price. These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. The only settlement or closing costs you can deduct are home mortgage interest, points that represent interest and certain real estate taxes. You may deduct them in the year you buy your home if you itemize your deductions. Real estate taxes are usually divided so that you and the seller each pay taxes for the part of the property tax year that each owned the home. You add certain other settlement or closing costs to the basis of your home. You include in your basis the settlement fees and closing costs that are for buying your home. A fee is for buying the home if you would have had to pay it even if you paid cash for the home There are some settlement or closing costs that you cannot deduct or add to the basis of your home. These include fees and costs that are for getting a mortgage loan. For more information refer to Publication 530, Tax Information for First Time-Homeowners, and Publication 936, Home Mortgage Interest Deduction.

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