Foreclosure Home Purchase Tax Deductions
You have quite a number of deductions allowed by tax laws. However, make sure that you meet legal requirements.
Tax-deductible expenses for your foreclosure purchase
You are allowed to deduct the following expenses in the year of your purchase of foreclosure property:
- Your payment and expenses relating to “purchase” of foreclosure home
- Escrow expenses
- Recordation fees paid to county
- Title search insurance premium
- Private Mortgage Insurance (PMI) premium, if applicable, in case of down payment less than 20 percent of home purchase amount
- Foreclosure inspection fee
- Home appraisal fee (reimbursed amount if paid by lender)
- Interest charged on your mortgage loan in advance
- Property taxes prorated based on close of escrow (COE) date
- Loan initiation/application fee and any other charges made by lender
- Points you pay to get lower interest rate on your home mortgage loan
- Expenses that you incur for moving your household goods (furniture, cloths, appliances, etc.)
- Hotel expenses, food, gas expenses you spend for moving your family
- Your expenses relating to “maintenance” of foreclosure property
- Foreclosure repair expenses
- Listing and advertising expenses
- License fees
- Utility (electric, gas, water) expenses
- Home depreciation allowance under IRS regulations
Make your foreclosure home expenses acceptable
All of these expenses must be related to bank foreclosure or government foreclosure home that you purchased. Home mortgage loan must be used to purchase a home of your primary residence. Points must be reported on RESPA Settlement Statement (HUD-1), calculated as a percentage of loan principal, and paid directly by you.
Important note: This information is provided for informational purposes and does not constitute a tax or accounting advice. Please check with your tax accountant, CPA, and other professionals if you need a professional advice and see our Disclaimer.