[Information added 11:20 am PST 4-18-17]
Adjusted basis is cost basis plus increases and minus decreases. Increase the basis of any property by all items properly added to a capital account. These include the cost of any improvements having a useful life of more than 1 year.
The following items are some of the settlement fees or closing costs you can include in the basis of your property when you purchased it and when you sold it.
- Abstract fees (abstract of title fees);
- Charges for installing utility services;
- Legal fees (including title search and preparation of the sales contract and deed);
- Recording fees;
- Transfer taxes;
- Owner's title insurance.
See the screenshot below for more examples.
Some settlement fees and closing costs you can’t include in your basis are:
Fire insurance premiums,
Rent for occupancy of the house before closing,
Charges for utilities or other services related to occupancy of the house before closing,
Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994),
Charges connected with getting a mortgage loan, such as:
Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs),
Loan assumption fees,
Cost of a credit report,
Fee for an appraisal required by a lender, and
Fees for refinancing a mortgage.
- Decreases to Basis The following are some items that reduce the basis of property.
- Section 179 deduction.
- Nontaxable corporate distributions.
- Deductions previously allowed (or allowable) for amortization, depreciation, and depletion.
- Exclusion of subsidies for energy conservation measures.
- Certain vehicle credits.
- Residential energy credits.
- Postponed gain from sale of home.
- Investment credit (part or all) taken.
- Casualty and theft losses and insurance reimbursement.
- Certain canceled debt excluded from income.
- Rebates treated as adjustments to the sales price.
- Gasguzzler tax.
- Adoption tax benefits.
- Credit for employer provided child care.
See Publication 551 (Rev. December 2016) - IRS.gov for additional information that may apply to your particular situation
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