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ITEMS DEDUCTIBLE ON SETTLEMENT STATEMENT:

The closing statement to a real estate purchase contains many potential tax deductions. Treatment of closing statement line items differ depending on whether the property is business (rental) property or used for a personal residence.

Below is a summary of a typical tax treatment of major line items of the often used 2 page HUD-1 closing statement. However, there may also be certain items that are treated differently depending on your particular situation.

A notation of "basis" refers to costs that become part of the total capitalized cost of the property and not currently deductible, however, these costs can be deducted at the time of sale, or earlier via depreciation if they relate to rental property.

Purchaser (Borrower) HUD-1 Closing Statement - Page 1
HUD-1 Line # Closing Statement Description Tax Treatment - Personal Residence Tax Treatment - Rental Property
101Contract Sales Price basis - is relevant if property is later sold or rented basis - building portion eligible for depreciation
102 Personal Property basis - is relevant if property is later sold or rented basis - eligible for accelerated depreciation
103 Settlement Charges See lines 700-1305 below See lines 700-1305 below
104-105 Miscellaneous Varies Varies
106 City/town taxes (See line 210 below) Deductible as itemized deduction on form 1040 schedule A * Deductible as rental expense*
107 County taxes (See line 211 below) Deductible as itemized deduction on form 1040 schedule A * Deductible as rental expense*
108 Assessments (See line 212 below) LID assessments are part of basis, other assessments are typically non-deductible. LID assessments are part of basis, other assessments are typically deductible. *
109-112 Miscellaneous Varies Varies
210 City/town taxes (See line 106 above) * This credit reduces deductible taxes on line 106 above * This credit reduces deductible taxes on line 106 above
211 County taxes (See line 107 above) * This credit reduces deductible taxes on line 107 above * This credit reduces deductible taxes on line 107 above
212 Assessments (See line 108 above) * This credit reduces assessments on line 108 above * This credit reduces assessments on line 108 above
213-216 Miscellaneous Varies Varies


Purchaser (Borrower) HUD-1 Closing Statement - Page 2
HUD-1 Line # Closing Statement Description Tax Treatment - Personal Residence Tax Treatment - Rental Property
700-703 Sales & Realtors Commissions basis basis
801 Loan Origination Fee Deductible as itemized deduction ("points") on form 1040 schedule A. Amortized over term of mortgage
802 Loan Discount Deductible as itemized deduction ("points") on form 1040 schedule A Amortized over term of mortgage
803 Appraisal Fee basis basis
804 Credit Report Non-deductible basis
805 Inspection Fee basis basis
806 Mortgage Insurance Fee Non-deductible Amortized over term of mortgage
807 Assumption Fee Non-deductible Amortized over term of mortgage
808-811 Miscellaneous varies varies
901 Prorated Interest Deductible as itemized deduction - this interest typically included in year end interest statement (form 1098) Deductible as rental expense - this interest typically included in year end interest statement (form 1098)
902 Mortgage Insurance Non-deductible Amortized over term of mortgage
903 Hazard Insurance Non-deductible Deductible as rental expense
904-905 Miscellaneous Varies Varies
1001 Hazard Insurance Non-deductible Reserves - deductible when paid from escrow
1002 Mortgage Insurance Non-deductible Reserves - amortizable when paid from escrow
1003 City property taxes Reserves - deductible as itemized deduction when paid from escrow Reserves - deductible when paid from escrow
1004 County property taxes Reserves - deductible as itemized deduction when paid from escrow Reserves - deductible when paid from escrow
1005 Assessments varies varies
1006-8 Miscellaneous varies varies
1101 Settlement Fees basis basis
1102 Abstract or title search basis basis
1103 Title Examination basis basis
1104 Title Insurance binder basis basis
1105 Document Preparation basis basis
1106 Notary Fees basis basis
1107 Attorneys Fees basis Typically part of basis, if tenant related may be amortized over term of lease (s)
1108-1110 Title Insurance basis basis
1111-1113 Miscellaneous Varies Varies
1201 Recording Fees basis basis
1202 City/County tax stamps basis basis
1203 State tax/stamps basis basis
1204-05 Miscellaneous Varies Varies
1301 Survey basis basis
1302 Pest Inspection basis basis
1303-1305 Miscellaneous Varies Varies
The above table summarizes tax treatment to buyers of properties - for sellers, these costs (including remaining basis) are deducted at the time of sale, with the exception of costs that are specifically noted as non-deductible. Of course, capital gains may not be recognized if the property is a personal residence qualifying for the $ 250,000/$ 500,000 capital gain exclusion, or a rental property disposed of via a tax free exchange.
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