by Shawn M. Grimsley
Claiming certain deductions will require you to itemize your personal tax return.
A HUD-1 is a form used in real estate closings to itemize the charges and adjustments paid by borrowers and sellers in purchasing property. The HUD-1 will not only tell you how much you spent, but it will also tell you where each dollar went. The HUD-1 is supposed to include all expenses -- including those paid outside of closing, which are marked "P.O.C." Since the HUD-1 records all expenses at closing, it's a good place to start in determining what expenses are deductible.
Several expenses at closing are deductible in the tax year in which they are incurred. Interest on your loan paid at closing is tax deductible. Any prorated property taxes allocated as your expenses are also deductible. You can deduct loan origination fees or points,
which are the fees a bank charges you for making the loan. You might qualify to deduct your private mortgage insurance premium, but you will have to meet certain income requirements. A seller may also deduct certain prepayment penalties imposed for paying off his loan early.
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