Selling land, what expenses be deducted to offset capital gains

Forum|Forum|4 years ago
March 9, 2022
2 replies
14 views

I sold my recreational land this year. Need to know what expenses can be used to adjust my cost basis (websites say you can increase your cost basis by using some closing costs when you bought it, and other things, but they don't detail what those are), and offset the selling price (i.e. realtor fees, replacing a roof, land improvement, etc.) to lower capital gains.

Just seeing if these are listed somewhere on TurboTax or elsewhere, or if anyone knows the most common ones are.

DianeW777

Level 15

Add the cost of the improvements as part of your purchase price. You can increase your cost basis by the purchase ( and sales) expenses and those would be:

Real estate commissions
Transfer tax
Legal fees
Advertising fees
Home inspection reports
Title insurance
Geological surveys
Loan charges (points) or other fees paid on the buyer's behalf

Sales expenses do not include:

Mortgage payoffs
Home equity loan payoffs
Rent-back costs
Payoff to creditors
Property taxes
Home owner association fees

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KrisD15

Level 15

It depends.

If this is not a BUSINESS you can't.

If this is being held as an investment, you can't claim expenses such as travel. Only costs that affect the basis would count. (What it cost you to purchase it)

If this is a building, and you "Materially participate" you could claim expenses, such as gas or mileage. However, you would need to list the vehicle as a business asset, and the IRS could question how you could materially participate in something that was located so far away.

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Nan2C

Level 5

Thanks for your reply

WACR

Level 2

Question: when selling land (vacant lot) bought as an investment can I deduct property taxes payed while holding the lot?

KristinaK

Employee Tax Expert

Yes, you can. It will go on Schedule A, if you itemize.

Remember, the deduction of taxes on Schedule A is limited to $10,000. So if you are itemizing, but have other taxes (state income tax, as an example), it might be a "waste" of a deduction. In that case, it may be better to elect to add the taxes to the cost/basis of the property.

I suggest you preview your Schedule A and see what the total amount of taxes on line 7 you are currently showing.

Where do I enter my real estate taxes in TTO?

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