topic where to enter mortgage loan payoff in Deductions & credits

where to enter mortgage loan payoff

francster — Thu, 20 Feb 2025 16:38:13 GMT

When entering information to calculate the gain on the sale of primary residence there is no line item to enter mortgage loan pay off. Please confirm that the way to adjust for the loan payoff amount is to subtract the loan payoff amount from the contract sale price to get the 'Sales Price to YOU' and enter that value in the "Sales Price" blank.

example: Contract sale price of $1.5M minus the loan payoff of $300K, would mean the Sales Price to YOU is $1.2M, and THAT is what goes in the form as "Sales Price".

Re: where to enter mortgage loan payoff

pk — Thu, 20 Feb 2025 18:51:48 GMT

@francster for purposes of gain/loss computation, the mortgage pay-off amount is NEVER used.

Your Gain is Sales Proceeds LESS Basis in the property.

Sales Proceeds = Sales Price LESS allowable Sales Expenses ( generally things like title insurance costs, Sales commission, transfer Tax , sales preparation costs like repairs, paining etc. done only for the purpose of selling.

Basis = Acquistion Price/ Cost + Cost of any improvements over the holding period

The above is assuming that the property was never used a income property ( i.e. depreciable property ).

Does this make sense ?

Re: where to enter mortgage loan payoff

francster — Thu, 20 Feb 2025 20:17:34 GMT

yes, I agree, but the issue is around the definition of Sales Price. The definition I see in publication 523 is that the sales price is 'everything you received for selling your home'. From Pub523 'Worksheet 2; How to Figure Your Gain or Loss', the forms look at this calculation beginning with the money you receive, so the Selling Price would be after the mortgage loan in deducted from the proceeds.

Re: where to enter mortgage loan payoff

DoninGA — Thu, 20 Feb 2025 20:19:32 GMT

@francster The Sales Price is what the Buyer of the home paid for the home, no more, no less.

Re: where to enter mortgage loan payoff

VolvoGirl — Thu, 20 Feb 2025 20:20:43 GMT

Selling price is the gross amount you got before paying off the mortgage. You actually got it, it just went to something you owed. It was for your benefit. Selling price is not your net proceeds.

Re: where to enter mortgage loan payoff

francster — Thu, 20 Feb 2025 20:28:47 GMT

Then if the mortgage payoff isn't deducted that amount would flow though to profit and capital gains tax would be due to it. That doesn't sound right to pay tax on money you didn't receive.

Re: where to enter mortgage loan payoff

DoninGA — Thu, 20 Feb 2025 20:32:29 GMT

This is how to calculate on gain or loss on the sale of the home, mortgage payoff is not included in the calculation -

Gain or Loss = Sales Price minus Sales Expenses minus Adjusted Basis (Purchase Price plus the cost of improvements prior to the sale)

Sales Expenses can include escrow fees, legal fees, real estate agent commissions, advertising costs, and even home staging fees.

Re: where to enter mortgage loan payoff

VolvoGirl — Thu, 20 Feb 2025 20:37:01 GMT

@francster wrote:
Then if the mortgage payoff isn't deducted that amount would flow though to profit and capital gains tax would be due to it. That doesn't sound right to pay tax on money you didn't receive.

But you did receive it. You got it when you originally bought the house.

Re: where to enter mortgage loan payoff

francster — Thu, 20 Feb 2025 21:02:40 GMT

Ok, I see now. I missed that the total basis includes the amount you borrowed. When you include borrowed funds in the basis you don't need to deduct the mortgage payoff as the basis includes that and Sales price in the full price.

Re: where to enter mortgage loan payoff

jimavera — Sun, 02 Mar 2025 06:19:19 GMT

>[expenses of sales:] sales preparation costs like repairs, paining etc. done only for the purpose of selling.

NOT TRUE -- be careful. "Fix up" repairs may not be deducted from the sales price as sales expenses because they do not "improve" the property but merely "maintain" it. There are many articles about this on the Internet basically saying that Real Estate sites which claim fix-up repairs are deductible from sales proceeds are wrong.

See https://ttlc.intuit.com/community/tax-credits-deductions/discussion/if-i-sold-a-home-can-i-deduct-the-cost-to-repair-prior-to-selling-[product key removed]ses-can-be/00/2414593

Re: where to enter mortgage loan payoff

DawnC — Mon, 03 Mar 2025 01:25:05 GMT

If you sold your home, you can deduct:

Home improvement costs (permanent changes) as an adjustment to the basis of the home you sold (not the same as repairs and maintenance)
Mortgage interest and real estate/property taxes charged at closing
Selling expenses to reduce your gain on the sale side of the home

If you sold a home that you use as a rental or investment property at a loss, you might also be able to deduct it as a loss. @jimavera

Home Repair Expenses

Home Improvement Costs