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My wife and I bought a house at the beginning of this year

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Hi Pearl JA: The Accountant will...
Hi Pearl
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: My wife and I bought a house at the beginning of this year (2016). I put down our Earnest Money Deposit of $8500 in December though and was wondering if that is Tax Deductable?
JA: Is there anything else important you think the Accountant should know?
Customer: no
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Submitted: 1 year ago.Category: Tax
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2/11/2016
Tax Professional: Lev, Tax Advisor replied 1 year ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,143
Experience: Taxes, Immigration, Labor Relations
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Earnest Money Deposit is fully refundable or it is applied top your purchase price as in your situation - but that amount may not be deducted on your tax return. Sorry if you expected differently.

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Tax Professional: Lev, Tax Advisor replied 1 year ago

That is not a payment - but should demonstrate good faith in your intention to complete the purchase transaction.

You will be able to deduct real estate taxes and mortgage interest on your 2016 tax return.

,

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Tax Professional: Anne, Master Tax Preparer replied 1 year ago
Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2,439
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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HI

I'm Anne. I've been preparing taxes for 27 years and I have a different answer for you.

The earnest money that you put down on a home is generally NOT refundable. This money is used towards closing costs, and becomes part of the cost basis in your home.

If the deal falls through, you might receive a small portion of the earnest money back, but most of it remains in escrow, until you find another home. Please see below for more in depth information.

http://www.realtor.com/advice/finance/understanding-the-earnest-money-deposit-2/

If you have further questions, please post them here & I'll be notified.

If this answer has helped you, please rate positive by clicking on the stars.

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