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Level 3
posted Mar 13, 2025 5:42:14 PM

Application of Closing Costs

For the sale of a second home resulting in a gain, are the following basics correct with regard to how closing costs are typically applied?  :

 

- The basis should be adjusted for those closing costs attributed to the PURCHASE of the home, effectively reducing the gain.

- The closing costs on the SALE of the home should be included in the seller expenses, which are then applied as an adjustment (code 'E') on the 8949, effectively reducing the gain.

 

SE

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1 Best answer
Expert Alumni
Mar 13, 2025 6:00:37 PM

Yes, closing costs applicable to purchasing the home, not the mortgage can be added to the basis.   And yes, when you sell the home, they are selling expenses that will reduce the gain on 8949.   See Pub 523

1 Replies
Expert Alumni
Mar 13, 2025 6:00:37 PM

Yes, closing costs applicable to purchasing the home, not the mortgage can be added to the basis.   And yes, when you sell the home, they are selling expenses that will reduce the gain on 8949.   See Pub 523