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Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2429
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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My wife and I bought a house at the beginning of this year

Customer Question

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
JA: OK. Got it. Last thing - JustAnswer charges a fee (generally around $32) to post your type of question (you only pay if satisfied). While you're filling out that form, I'll tell the Accountant about your situation and then connect you two.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

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.

Expert:  Lev 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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Expert:  Anne replied 1 year ago.


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.

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

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