Can I include a home warranty as part of sales expenses for a sold home?

[hughcamp]

In addition to concessions paid at closing, we purchased a home warranty on a house we sold. Can i claim the home warranty under the Sales Expenses?

[ChelsiE2 · Accepted solution]

Unfortunately, the IRS will not allow you to deduct the cost of a home warranty as a selling expense when computing the gain/loss on a sale of your home.  

Here is what the IRS allows for Selling Expenses: 

1. Any sales commissions (for example, a real estate agent's sales commission) 

2. Any fees for a service that helped you sell your home without a broker 

3. Any advertising fees 

4. Any legal fees 

5. Any mortgage points or other loan charges you paid that would normally have been

   the buyer's responsibility 

[Bittner73]

Hello. I wanted to see if anything has changed as far as the rules on this question.  I recently sold a primary residence that I owned for less than 2 years.  The buyer demanded a home warranty as part of the contract after the home inspection phase.  My tax person said I CAN include the home warranty expense as part of my “selling expenses” to lessen my capital gains, along with me also giving the buyer a $5,000 seller credit towards her closing costs. I realize tax laws change from year to year so just wanted to see if this is why I am getting different guidance.   

[ErnieS0]

No. There is no change to the tax law. Home warranties on personal residences are not deductible (much like you cannot deduct hazard insurance). They are deductible on income-producing property.

[LLC2020]

So if I sell an apartment building and the buyer requires me to buy a home warranty for each of the apartments, is this cost deductible?  If so, what tax category do I include it in?  

Thank you

[Critter-3]

If you are the seller and you buy a warranty policy for the new owners then that IS included in the cost of selling the property.    If you are the buyer and it is a personal residence there is no deduction to be taken.  

[LLC2020]

Thank you!!