The holiday season is a time for gift-giving, and if you’re thinking about buying or selling a home, closing the deal before December 31 might just be one of the best presents you can give yourself. Along with the excitement of a new beginning, you could unwrap valuable tax benefits that can make a big impact come tax season. Here’s a look at some of the financial perks that await those who finalize their real estate transactions before the ball drops on New Year’s Eve!

1. Mortgage Interest Deduction: A Gift That Keeps on Giving

For new homebuyers, one of the biggest tax benefits is the mortgage interest deduction. By closing on your home before the end of the year, you can deduct the interest paid on your mortgage in 2024. This is a particularly sweet benefit, as initial payments often lean heavily toward interest rather than principal. For example, if you pay a few months of interest by the end of December, you can claim this deduction when you file in April, potentially reducing your taxable income by thousands of dollars. It’s like adding a little holiday bonus to your bank account!

2. Property Tax Deduction: A Year-End Tax Saver

When you buy a home, property taxes are generally split between buyer and seller based on the closing date. For buyers who complete the sale before December 31, any property taxes you pay in 2024 could be deductible on this year’s tax return, lowering your taxable income.

Similarly, sellers can also benefit from any remaining property tax payments made before the sale. Since property taxes can sometimes be a significant expense, this deduction can be a helpful way to offset some of the year’s costs and keep more in your pocket—just in time for holiday shopping!

3. Closing Costs: Tuck Away Some Extra Deductions

Closing costs may be daunting, but they come with their tax benefits. For buyers, some closing costs are deductible, such as any points (prepaid interest) you pay to secure a lower mortgage rate. By paying these upfront in December, you can claim the deduction right away on this year’s taxes, which can lead to substantial savings. While not all closing costs are deductible, these upfront points are a unique perk of buying before year-end, making it a smart choice for those who want to enjoy an early tax benefit.

4. Capital Gains Exclusion: A Special Gift for Sellers

If you’re a homeowner selling your primary residence and meet certain criteria, the capital gains exclusion can be a significant holiday bonus.

 For qualifying sellers, up to $250,000 (for single filers) or $500,000 (for married couples) of profit from the sale can be excluded from your taxable income, provided you’ve lived in the home for at least two out of the last five years. This exclusion can be especially beneficial for sellers who’ve owned their home long enough to build substantial equity. By closing the sale before the end of the year, you can cash in on this tax-free gain and start the new year with a lighter tax bill—truly a gift worth celebrating.

5. Mortgage Insurance Premium Deduction: A Winter Windfall for Buyers

If your down payment was less than 20%, you might have to pay mortgage insurance premiums, also known as private mortgage insurance (PMI). But here’s the festive news: if you close before December 31, your PMI payments can be deductible on this year’s tax return, provided you meet income eligibility requirements.

6. Potential Tax Deductions on Moving Expenses (for Certain Buyers)

If you’re buying a home and relocating for a new job, you may be able to claim moving expenses on your taxes. While this deduction is generally limited to active-duty military members, some states allow tax deductions for moving expenses related to job changes. Moving for a new job by the end of the year may mean you can deduct the costs of the move, so it’s worth checking your state’s regulations.