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cuantoes
New Member

Can the concession to a buyer be deducted from the seller's cost basis (the capital gain I'd have to pay taxes on)? I'm selling my home.

Thank you all! The transaction is legitimate. The concession will not be under the table. My broker spoke with an attorney earlier today and the latter indicated that as long as the concession is structured in the offer it should be fine.
Carl
Level 15

Can the concession to a buyer be deducted from the seller's cost basis (the capital gain I'd have to pay taxes on)? I'm selling my home.

Smart move getting legal representation. That way, you "know" you're covered.

Can the concession to a buyer be deducted from the seller's cost basis (the capital gain I'd have to pay taxes on)? I'm selling my home.

If you are the seller and grant a seller's concession, that reduces the sales price for capital gains purposes.  It also reduces the buyer's cost basis.

For example, if the listed sales price is $300,000 and you grant a $20,000 concession, the actual sales price is $280,000.

Can the concession to a buyer be deducted from the seller's cost basis (the capital gain I'd have to pay taxes on)? I'm selling my home.

You can also subtract from the sales price, certain other costs of selling, like a real estate commission, stamp tax or deed transfer tax levied by the county, or surveys and inspections that you paid for.
Carl
Level 15

Can the concession to a buyer be deducted from the seller's cost basis (the capital gain I'd have to pay taxes on)? I'm selling my home.

Well, if what's going on is what I think it is (and I hope it's not) then the deal will fall apart at the closing at the latest. The best thing the seller can do is seek legal advice from a real estate attorney. Heck, any time one is buying or selling real estate I always recommend having an attorney review everything before the closing. Then if possible have the attorney present at the closing too.
Now I've yet to actually sell any real estate in over 20 years now, and laws have changed a lot since then. But I've been through four closings myself as a buyer. One thing I've always done is to demand a copy of all closing documents at least 24 hours prior to the closing appointment so I can review them. On every single closing I've always found mistakes in those documents, that had the potential to cost me dearly down the road if I were to have missed them at the actual closing. When I find those mistakes, they're the first things I point out at the closing, and it's generally no problem to get them corrected right there on the spot, so that I'm signing a 100% perfectly correct document that has no "corrections" annotated on the document itself.

Can the concession to a buyer be deducted from the seller's cost basis (the capital gain I'd have to pay taxes on)? I'm selling my home.

If the concession was for appliances for the home will that be an improvement the same as the foundation regarding taxes?

 

Can the concession to a buyer be deducted from the seller's cost basis (the capital gain I'd have to pay taxes on)? I'm selling my home.

Any concession is added to the cost of sale ... it is just that simple.  You MUST report the total sale price listed on the 1099-S or you WILL get an IRS letter in a year or 2. 

agada
New Member

Can the concession to a buyer be deducted from the seller's cost basis (the capital gain I'd have to pay taxes on)? I'm selling my home.

Many lenders now do not require 20% and a semi-decent borrower can get it down to 3-5%.   I recently closed on a house with Garden State Mortgage and I got 5% down and the lender covered much of the closing costs.  Of course, if you are under 20% you will get hit with PMI costs every month until you achieve 20% equity. 

 

Now I am trying to sell my old house and everyone is asking for seller concessions.  Two friends I know also received money from the seller to cover their closing costs.  However, the seller concession will appear on any closing docs and a large seller concession which goes beyond the closing costs will raise red flags with the lender.  

 

As you do point out, this can create problems with the appraisal since no bank will offer more of a loan than the house is worth and that is where this approach can fall apart.

jimguerr1
New Member

Can the concession to a buyer be deducted from the seller's cost basis (the capital gain I'd have to pay taxes on)? I'm selling my home.

Generally, you are incorrect! A borrower under the correct circumstance can put down as little as 3%. The problem with the conversation chain is that the Seller meant to say the buyer wanted to make the purchase price $300K and get a $50K concession toward credit costs. THAT could never happen because the closing costs on that low of a price could never reach $50K. They were probably asking for a seller second mortgage or to get money back post closing both of which are not allowed.

Can the concession to a buyer be deducted from the seller's cost basis (the capital gain I'd have to pay taxes on)? I'm selling my home.

This is a terribly worded and wholly inappropriate answer.   A sellers concession helps the buyer to manage closing costs.  There is usually not a repair involved so you’ve moved this entire issue to another category and done so with arrogance.  Saying ā€œreporting it correctly to the IRSā€ helps no one.  I had the same question as OP. The concession - for your future reference - gets tacked onto the sale price of the house and then goes to the buyer for closing.  I’ve read the responses for 5 minutes and cannot go on as the general hostility while misunderstanding the question is really shameful.  Please don’t respond.  This was more than enough - 

Can the concession to a buyer be deducted from the seller's cost basis (the capital gain I'd have to pay taxes on)? I'm selling my home.

Completely agree. 

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