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

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My wife and I...

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?

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Submitted: 2 years ago.Category: Tax
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2/11/2016
Tax Professional: Lev, Tax Advisor replied 2 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,318
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 2 years 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 2 years ago
Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2,452
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/

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