As autumn deepens, there's a question that often comes up during buyer consultations: Is it better to close in December or to wait until January?

To get straight to the point, there isn't just one correct answer. However, there are three clear tax implications that change if you close before the end of the year, so it's wise to know these when choosing your date.

The following information is based on IRS Publications 530 and 936, as well as guidance from the LA County Treasurer's Office, as of October 2026.

The first is the interest and points paid at closing. If you look at the closing documents, there's a line item for prorated interest from the closing date to the end of that month, commonly referred to as per diem interest.

The IRS limits deductible closing costs to just three items: qualified points, prorated interest, and property taxes assessed to the buyer.

Points are generally deducted over the life of the loan. However, if the points were paid on a primary residence, are at a typical level for the area, and are not replacing other costs like appraisal or title fees, they can be deducted in full in the year they were paid.

So, if you close in December, the points will be included in your 2026 tax return, while a January closing will push them to your 2027 return.

However, prepaid interest is not automatically deductible this year. If you paid interest that covers the period extending into the next year, only the portion attributable to this year can be deducted.

The second item is the property tax adjustment. At closing, the seller and buyer prorate property taxes based on the closing date, and the amount paid by the buyer counts toward deductions for that year.

This year, there's a change in the SALT cap. The cap for state and local tax deductions has increased to $40,400 for the 2026 tax year, and for married individuals filing separately, it's $20,200.

In the past, during the $10,000 cap era, many homes in California reached the limit with just state income tax, making property tax deductions effectively useless. Now that there's more room, paying property taxes at year-end could have a real impact.

However, this doesn't apply to everyone. If your modified adjusted gross income exceeds $505,000, the cap begins to phase out, and if it exceeds $606,300, it reverts back to $10,000.

Another important point to note is the supplemental tax bill. When you buy a home, it gets reassessed under Prop 13 based on the purchase price, and a separate bill will be issued for the difference from the previous assessed value.

According to LA County guidance, this bill typically arrives 3 to 9 months after closing, and even if you have an impound account, it will be sent directly to the homeowner, not the bank. Even if you close in December, you'll likely receive this bill the following year, so the deduction will carry over to that year as well.

You should also be aware of the regular property tax schedule. In LA County, the first installment is assessed on November 1 and is delinquent after December 10, while the second installment is assessed on February 1 and is delinquent after April 10.

Many people ask if they can prepay the second installment in December and still count it as a deduction for that year. This depends on whether you have room under the new SALT cap and whether your income falls within the phase-out range, so it's hard to give a definitive answer.

The third consideration is whether to itemize deductions or take the standard deduction. This is often the most critical decision.

The standard deduction for 2026 is $32,200 for married couples filing jointly, $16,100 for individuals, and $24,150 for heads of household. If the total of your interest, points, property taxes, and state income tax doesn't exceed these amounts, the deductions mentioned earlier become essentially meaningless.

If you close in mid-December, you'll have just over two weeks of mortgage interest for that year. If you didn't buy many points, the standard deduction may be more beneficial in the first year.

Conversely, if you close in early January, you'll accumulate nearly a full year's worth of interest in that year. If the loan amount is large, it's likely that you'll switch to itemizing deductions starting in the second year.

When you compare the two options side by side, closing in December allows you to use points and property tax adjustments immediately, but if you don't exceed the standard deduction, that advantage may disappear.

Closing in January makes it easier to bundle all first-year deductions into one year. However, during the holiday season, lender or escrow schedules may be delayed, making it harder to align dates as you wish.

Federally, the interest deduction limit is set at $750,000, but California maintains a $1 million limit, so in high-cost areas like this, federal and state reporting numbers can differ.

If you're selling, the closing date determines the year in which the capital gains will be recognized. If you meet the two-year residency requirement, you can exclude up to $250,000 for individuals and $500,000 for couples, but any gains exceeding that will be calculated along with other income for that year, so choosing the year matters.

From my experience over the years, I've found that letting tax considerations prevent you from acquiring a good home or a favorable interest rate is a backward choice. The tax differences based on closing dates usually only last a year or two, but the differences in rates and prices will follow you until the loan is paid off.

Still, if you have some flexibility in choosing your date, it's worth doing the math. Writing down your expected income, points, property tax adjustments, and state income tax on one sheet can quickly clarify your direction.

Personally, I would actively adjust the date only in cases where I'm buying a lot of points or if the capital gains from selling are significant. Otherwise, the contract terms and interest rates take precedence.

Since the outcome can vary greatly depending on your personal income structure and deduction items, I recommend checking with a tax advisor or CPA before finalizing your date.