What fees/costs can I claim when purchasing the 2nd home? What fees/costs can I claim when selling it? For capital gains. Add fees to purchase price & deduct fees to selling price. Owned for 2 years. Not rental.
The only deductible expenses in owning a second home ate mortgage interest and taxes. When you sell the home you can include selling costs in the basis, and the costs of any improvements you made to the property.
Which selling cost are you referring to? There are a lot listed on the document.
Settlement fees and other costs.
The following settlement fees and closing costs for buying the property are part of your basis in the property.
Sales expenses include:
- commissions
- appraisal fees
- broker's fees
- legal fees
- advertising fees
- home inspection reports
- title insurance
- transfer taxes or fees
- geological surveys
- loan charges (points) or other fees paid on the buyer's behalf
@imaroadrunner
Can I claim the same fees/expenses that are listed on the document when we purchased the house?
Expenses you must pay to obtain title to your home are added to the home's tax basis. This means the expenses will increase the value of the home for tax purposes, and reduce the amount of any taxable profit you realize when you sell the home.
These expenses include:
You can also add to basis any expenses of the seller that you agree to pay, such as real estate broker commissions.
The remaining costs you incur to purchase a home are neither deductible nor eligible to be added to your home's basis. As far as taxes go, they are useless. These costs include all the costs you incur to obtain a home loan--for example:
You also can't deduct or add to your home's tax basis hazard insurance premiums, homeowners' association fees, or utility fees.
A commitment fee is a fee that a lender may charge a borrower to whom it has agreed to extend credit. Generally charged for lines of credit not yet used, the commitment fee is a way of guaranteeing the bank will keep the funds available.
So its not any of the normal costs/fees listed on the closing documents. What would it be called?
Any closing cost that you don't deduct on your tax return in the current period, such as interest and property taxes, can be added to the basis of the home you are purchasing, outside of prepaid amounts (prepaid property taxes for instance.) It doesn't matter what they are called.
Can they be claimed on selling & purchasing. We purchase & sold a 2nd home. Trying to claim everything I should on taxes to figure the profit from selling.
The home sale gain exclusion doesn't apply to a second homes. However, it's worth mentioning that the IRS defines the term primary residence as somewhere that you lived full-time for at least two of the five years preceding the sale.
Yes, I understand that. I'm trying to get the the purchasing price with all claimable fees & selling price with all claimable fees for the cost basis profit.
Items added to basis. You can include in your basis the settlement fees and closing costs you paid for buying your home. A fee is for buying the home if you would have had to pay it even if you paid cash for the home. The following are some of the settlement fees and closing costs that you can include in the original basis of your home.
• Abstract fees (abstract of title fees).
• Charges for installing utility services.
• Legal fees (including fees for the title search and preparation of the sales contract and deed).
• Recording fees.
• Surveys.
• Transfer or stamp taxes.
• Owner's title insurance.
• Any amount the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, cost for improvements or repairs, and sales commissions.
If the seller actually paid for any item for which you are liable and for which you can take a deduction (such as your share of the real estate taxes for the year of sale), you must reduce your basis by that amount unless you are charged for it in the settlement.
Page 10 Publication 530 also see Page 2 Pub. 551, Basis of Assets.
Selling Cost Basis Adjustments—Details and Exceptions You should include many, but not all, costs associated with the purchase and maintenance of your home in the basis of your home. For more information on determining basis, see Page 8 Publication 523
Selling house closed 1/31/19. Can I use these fees/charges to lower our selling price? Irrigation, HOA, mortgage interest. When buying 2/17/17, can I use these fees/charges to increase purchase price? Homeowner ins, closing fee, closing letter, courier fee, title endorsement fee, wire transfer fee, & title insurance transaction fee. This is 2nd home.
Sorry I didn't say, some of the fees/costs were for just the 1 month.
Here is a list of your fees:
YES=Irrigation, courier fee, title endorsement fee, wire transfer fee, & title insurance transaction fee.
NO=HOA, mortgage interest, Homeowner ins, closing fee
Closing letter = yes, if you mean preparation of said letter
The closing costs are used for specifics items so you must classify each item to determine if it is added to basis. For example, closing costs can be used to pay interest, taxes, abstract costs etc. so you cannot say Yes or No to Closing Costs categorically.
Its listed as closing fee, closing protection letter, courier fee, notary fee, title endorsement fee, & wire transfer fee.
Because it is a "closing fee" it is most likely an administrative fee for preparing the docs so it would be added to basis.
So I can add those fees to the purchase price of the house, which will reduce the amount of taxable profit on the sale?
Yes, you can. 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
Appraisal Fee
However, you can deduct the following:
For a new loan or refinance, mortgage interest paid (including origination fee or "points"), real estate taxes, and private mortgage insurance (subject to limits) are deductible.
Enter the above expenses in the following areas:
1. Mortgage interest paid: Federal Taxes>Deductions &Credits> Your Home, select Mortgage Interest, Refinancing, and Insurance
2. Points (or Loan Origination Fee): Federal Taxes>Deductions &Credits> Your Home, select Mortgage Interest and Refinancing, and Insurance- (
3. Real Estate Taxes: Federal Taxes>Deductions &Credits> Your Home>Property Taxes
4. Mortgage Insurance: Federal Taxes>Deductions &Credits> Your Home> Mortgage Interest, Refinancing, and Insurance
Some of the above expenses may be on your HUD-1 settlement statement.
Source: Marketstar