Determining Basis for Real Estate

Forum|Forum|4 years ago
March 13, 2022
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I had purchased two plots of land some 40 years ago with down payment and monthly installment payments over 20 years. At the beginning of 2021 I sold one of the plots for which I did receive the 1099-S from the title company that handled the transfer transaction. Can I include the interest, property taxes and annual HOA fee I paid over the years I owned the plot in the cost basis to determine the capital gain?

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JillS56

Level 10

No, interest from mortgage payments, property taxes, and annual HOA can not be added to your basis.

You can add to your basis the closing costs from the purchase of the land and the closing costs from the sale of the land.

Here is a link to Publication 530 with tax information for homeowners. Scroll down the Table of Contents to "Basis".

drjbos46Author

Level 2

Thank you very much for your answer. Publication 530 that you have referred to in your answer is titled Tax Information for Homeowners and the discussion under "Basis" talks about primary and secondary residence. Also, the discussion about the cost basis talks about the acquisition cost and property improvement costs. However, the period of time I owned the land it was not "improved" but maintaining the ownership did involve costs such as loan installment payments and property tax payments. Over the years these two costs add to a very large number and I am surprised that it is not considered as the "cost" of ownership and not included in the Basis.

So, anyway the rules that apply to homes also apply to land when it comes to determining the Basis, correct?