rajainvestor

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Real estate tax deduction
Real estate taxes paid on your main home (or second home) generally are deductible. According to the IRS, deductible real estate taxes include any state, local, or foreign taxes on real property levied for the general public welfare. Deductible real estate taxes do not include taxes charged for local benefits and improvements that increase the value of the property.

If you bought a house in 2004, you may deserve a bigger real estate tax deduction than you think you do. If the seller paid real estate taxes in advance for a period during which you actually owned the home, include that amount in your deduction -- even if you didn't reimburse the seller.

As far as the tax law is concerned, you paid tax, whether you did it directly or through a higher price for the house. Check your settlement sheet to make sure you don't overlook a money saver.

What about other costs associated with buying, like the title insurance premium or the appraisal fee, a recordation charge or the lawyer's' bill? Sorry, but none of them is deductible.
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The above link by Cameron H. says the above portion I have in quotes. However publication 530 at http://www.irs.gov/publications/p530/ar02.html#d0e292 says differently. I believe Pub 530 is correct.

-Raja