What are the tax consequences for not buying at the end of the month?

Asked by Joshua Karas, Arlington, VA Sat May 10, 2008

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Bruce Lynn, Agent, Coppell, TX
Sun May 11, 2008
It's not really the tax consequences most people are looking for when deciding to close at the end of the month. It is cash out of pocket. Some people think they are "saving money" by closing at the end of the month. This is also not the case. It's just a matter of when you pay the money. If you are cash poor, or just want to conserve cash then close at the end of the month....if you have plenty of cash then it really doesn't matter when you close.
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2 votes
Chris Tesch, Agent, College Station, TX
Sat May 10, 2008
Joshua, taxes are prorated for the year irregardless of whether you close at the end of the month or the beginning. If you close on the 149th day of the year then you get an equivilant of 149 days of taxes given to you at closing by the seller and you are responsible at the end of the year for the entire tax bill.

If you are asking about income taxes then let your CPA be your guide. Typically the taxes and interest are tax deductable if over the standard exemption. Closing at the end of the month wouldn't affect this either.

Truly the only affect that closing time during the month matters is when you are calculating interim interest. Interest is collected for the remainder of the days in the month up when you close so if you close on the 15th of May, then the interest from the 15th until 31st will be collected and you won't have a house payment typically until July 1.

Hope this helps!
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2 votes
Tom Hiller, Agent, Hampton, VA
Sat May 10, 2008
Closing on the last day of the month vs the first day of the next month has little tax consequence. It would mean one less day of interest you can write off as an itemized deduction at the end of the year. The main factor in waiting after the last day of the month is how much pre-paid interest you will pay out of pocket at the closing table. Example; Close on Jan 31st , pay 1 day of interest on the full loan amount, make your first installment payment on March 1st. Close on Feb 1, pay 28 days of interest on the full loan amount but your first installment is due April 1st. It's pay me now or pay me later. Some lenders will make exceptions if you close on or before the 5th of the month. You'll just need to talk to your mortgage officer about it.
1 vote
Dallas Texas, Agent, Dallas, TN
Sat May 10, 2008
Nothing moment the title is transferred to you the taxes are yours.
Web Reference:  http://www.lynn911.com
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