Are closing costs deductible?

[jstrickland2018]

We sold one house and purchased another.

[Marketstar · Accepted solution]

No, closing costs, including the below are not tax deductible but may increase the cost basis of your home which may benefit you in the event of sale.

• Attorney fees in connection with obtaining property

• Commissions

• State stamp taxes and transfer taxes

• Tax service fees

• Title policy fees or title insurance

• Miscellaneous abstracts of title, surveys, recording of deed

However, on a new loan, mortgage interest paid (including origination fee or "points"), real estate taxes, private mortgage insurance (subject to limits) are deductible.

[ciaoskip]

How about any "commitment " cost listed on the closing paperwork? Can this go into basis adjustment with other closing costs?

[LenaH]

No. A commitment fee is a fee that lenders charge in exchange for providing a guarantee to lend money in the future. This is considered a cost connected with getting or refinancing a mortgage loan. Commitment fees are neither deductible nor eligible to be added to your home's basis. 

Publication 530

@ciaoskip

[nailznut]

I sold a secondary home last year. In calculating the capital gains basis, would this include the original purchase price plus associated costs for the original purchase (appraisal, title search, closing and other fees) as well as the costs from the sale last year (commission, closing and other fees)?

[RaifH]

Yes, you would include the relevant acquisition costs to the cost basis of the property. The selling expenses would reduce the proceeds.

If you received a 1099-S for the sale in your closing documents, report the purchase price as it is reported on that form in the Investment Income section of your return. On the next screen, Let us know if any of these situations apply to this sale, select I paid sales expenses that aren't included in the sale proceeds reported on the form.

@nailznut

[nailznut]

So the costs associated with the purchase and sales would enter on line G of form 8949, long term . Also, what is the breakdown for capital gains tax, by income, on a secondary home sale? 

Where would I deduct the costs of major improvements to the property during the time of ownership?

[PatriciaV]

Capital gains are taxed according to your taxable income, but no higher than 15% for most individuals. Other rules apply. See IRS Tax Topic 409 for more info.

Major improvements to real property are added to the basis of the property and are not deductible costs.