Your adjusted cost basis is the total of everything you paid for the house - the original purchase price, fees and so on.
- Add to that the cost of all the improvements you have made over the years to get a grand total, which is known as the "adjusted basis."
You do not deduct the expenses of sale, except mortgage interest and real estate taxes, but you can add the amounts to the cost (basis) of your property.
- Real estate taxes and mortgage interest can be deducted on Schedule A if you itemize.
The following items are some of the settlement fees or closing costs you can include in the basis of your property when you purchased it and when you sold it.
- Abstract fees (abstract of title fees);
- Charges for installing utility services;
- Legal fees (including title search and preparation of the sales contract and deed);
- Recording fees;
- Surveys;
- Transfer taxes;
- Owner's title insurance.
See IRS Publication 551, Basis of Assets, page 2 and 3, Real Property, Settlement costs, for additional information that may apply to your particular situation.
Additional information:
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