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I understand that mortgage "points" paid at closing are deductible, even if paid by the seller. What about other non-recurring closing costs paid by the seller, such as escrow fee, title insurance fee, etc. Are they also deductible? How about the fee we paid to an inspector prior to purchasing the house? Our contractor told us to save the receipt since the cost is deductible. Is this correct? Is there a source where all these questions are answered?

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[[I understand that mortgage "points" paid at closing are deductible, even if paid by the seller.]]

Subject to some restrictions, this statement is generally correct.

[[ What about other non-recurring closing costs paid by the seller, such as escrow fee, title insurance fee,
etc. Are they also deductible?]]

Nope. They are additions to the basis (or cost, for tax purposes) of the property.

[[ How about the fee we paid to an inspector prior to purchasing the
house? Our contractor told us to save the receipt since the cost is deductible. Is this correct? ]]

Nope. Again, appraisal fees are not deductible in the true sense of the word. They are also additions to the cost of the property. So keeping the receipt was a good idea, but you'll find no place on the tax return to "deduct" it. You'll get these costs "back" if and when you sell the property. But with the new $250k/$500k capital gains exclusion on a personal residence, it is likely that these small additions to your cost basis would be insignificant. Read about the tax free gain on a personal residence in the Taxes FAQ area.

[[Is
there a source where all these questions are answered?]]

Try IRS Publication 523 at the IRS web site.

TMF Taxes
Roy

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