Date of Closing for deducting closing costs

sllauber · #1 (**permalink**) 12-27-2012, 12:55 PM

I have refinanced my primary home and am wondering which tax year I may deduct allowable closing costs. The closing date of the loan was December 27, 2012. Because of the required 3 day rescission period, my ability to rescind the loan is up at midnight on December 31, 2012. Funding of the loan and cashing of the check used to pay closing costs will not occur until January 2, 2013. What tax year will my allowable closing costs be deductible in - 2012 when all loan documents were signed or 2013 when the funding of the loan happened? I was hoping for the deduction in 2012...

Wnhough · #2 (**permalink**) 12-27-2012, 02:51 PM

“ The closing date of the loan was December 27, 2012. Because of the required 3 day rescission period, my ability to rescind the loan is up at midnight on December 31, 2012. Funding of the loan and cashing of the check used to pay closing costs will not occur until January 2, 2013. What tax year will my allowable closing costs be deductible in - 2012 when all loan documents were signed or 2013 when the funding of the loan happened? I was hoping for the deduction in 2012...”------------------> You can only deduct taxes that are actually paid in that year.You can claim your closing costs and property taxes if they are paid before the end of the year 2012. You cannot claim them as deductions in 2012 if you pay either of them in 2013. I believe that on the closing costs you pay for your refinanced mortgage, i.e., the origination fees, you will have to amortize them over the term of your mortgage. But if you haven't deducted all the closing costs of a prior refinancing, those remaining deductions would be accelerated into 2012 because that's when the mortgage was paid off precluding any further amortization.

sllauber · #3 (**permalink**) 12-27-2012, 02:58 PM

Quote:

Originally Posted by Wnhough

“ The closing date of the loan was December 27, 2012. Because of the required 3 day rescission period, my ability to rescind the loan is up at midnight on December 31, 2012. Funding of the loan and cashing of the check used to pay closing costs will not occur until January 2, 2013. What tax year will my allowable closing costs be deductible in - 2012 when all loan documents were signed or 2013 when the funding of the loan happened? I was hoping for the deduction in 2012...”------------------> You can only deduct taxes that are actually paid in that year.You can claim your closing costs and property taxes if they are paid before the end of the year 2012. You cannot claim them as deductions in 2012 if you pay either of them in 2013. I believe that on the closing costs you pay for your refinanced mortgage, i.e., the origination fees, you will have to amortize them over the term of your mortgage. But if you haven't deducted all the closing costs of a prior refinancing, those remaining deductions would be accelerated into 2012 because that's when the mortgage was paid off precluding any further amortization.

I guess that is at the heart of my question. Would payment date be the day the check was written and documents signed or the day they cash the check?

Wnhough · #4 (**permalink**) 12-27-2012, 03:17 PM

“Would payment date be the day the check was written and documents signed or the day they cash the check?”----> the day the check was written; you record expenses when cash is paid out(check is written). When it comes to tax deductions, they're taken in the taxable year when they're paid for.(written).