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    At Guardian Title & Trust Inc, we provide title insurance and real estate settlement services to individual consumers, Real Estate Agents, Mortgage Brokers/Loan Officers and Residential and Commercial Lenders throughout Florida. Guardian Title & Trust, Inc., is committed to the highest level of service and integrity from start to finish - our experienced and skilled staff will assure that our clients have a distinctively unique, rewarding and professional experience. Our mission at Guardian Title is to defend and protect, listen to our client's needs and respond with integrity at the highest level of professionalism, commitment and support.

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Can I Deduct Title Insurance on My Taxes?

 

title insurance

There’s something I must admit: the answer to this question can’t be a simple “yes” or “no.” That’s because it depends on whether you’re buying or selling property.

When You’re Buying…

The first thing you need to know is that the IRS treats buying a home as any other personal purchase, which indirectly means that you can’t write off certain costs, such as title insurance, homeowner’s insurance, down payment, earnest money, forfeited deposits and most settlement costs.

Though title insurance policy is a widely required condition associated with the home-buying process, the IRS considers it a nondeductible expense because the homeowner receives a service for it.

If you’re going to use the home as your primary residence, some of the costs you can deduct on your tax return are mortgage interest (including pre-paid interest), mortgage insurance and real estate taxes (amounts charged by state and local governments on the value of the property).

When You’re Selling…

You can add various items (expenses) to your home’s cost basis. What is your home’s cost basis? In a nutshell, the cost basis of a property is the entire amount the buyer pays for it, including down payment, debt assumed, closing costs, title search fees, title insurance, transfer or stamp taxes, etc. If you’re buying a $150,000 house, for example, and pay $5,000 on closing costs and $1,000 for title insurance, the actual cost basis is $156,000. Also, you can add the cost of any additions, improvements and repairs you’ve made to the basis of your property.

There also are costs that you can’t include into your home’s basis, such as home appraisal/inspection fees, credit report fees, loan fees, legal fees and other expenses you must pay to obtain the home loan.

In addition, there are situations when certain items can decrease the basis of a property. Some of these items are reimbursement for losses, deductible casualty losses that aren’t covered by insurance, and renting the home or using it for business.

What You Can Do

Who pays for title insurance can be negotiated in the contract. Therefore, you can ask the seller to pay for insurance and include the cost into the home’s basis. Since the cost of title policy is treated as a selling expense (just like any other costs incurred to make the house more marketable), the seller won’t have to pay extra tax.

Also, any costs added to the home’s basis will reduce the taxable profit when you sell the property. To calculate your taxable profit, take the adjusted home’s cost basis, add the costs you must cover to sell the house and subtract the total from the final selling price. The amount obtained is the taxable profit.

When filing your tax return, you can claim the standard deduction or itemize your deductions. Though the standard deduction is easier and may lower your tax liability, the only way to claim homeowner expenses is to itemize deductions. However, no one stops you from using both methods to compare results and choose the one that provides the greatest tax savings.

Guardian Title & Trust is one of the few title insurance companies that received ALTA Best Practices Certification, which is the proof that our professionals are able to provide the best title insurance, underwriting, escrow and closing services. Furthermore, our extensive knowledge and experience in the issuance of title insurance for purchase, sale and loan transactions have turned us into a reliable industry leader ready to serve any residential, commercial or industrial client. For more information, contact our team today at (904)-992-1162.