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Level 3
posted Dec 21, 2022 8:30:57 PM

Which of these are eligible to include as closing costs for tax basis?

I read this https://www.irs.gov/pub/irs-pdf/p523.pdf to calculate tax basis for my home. Still, it's not very clear which ones are eligible vs ineligible for my home. Possible to help me sort out, which is eligible to include in tax basis?

1. Appraisal Fee
2. Credit Report
3. Flood Certification
4. Tax Service Fee
5. Title - Courier Fee
6. Title - Endorsment Fee
7. Title - Lender's Title Insurance
8. Title - Notary Fees
9. Title - Other
10. Title - Recording Service Fee
11. Recording Fees (Deed)
12. Recording Fees (Mortgage)

0 5 1717
1 Best answer
Level 15
Dec 22, 2022 7:15:20 AM

Assuming this purchase was for your primary residence or a 2nd home and not any type of business property (such as rental property).

Those costs associated with acquisition of the loan are flat out not claimed anywhere on your tax return. Examples would include loan application fees and appraisal fees if an appraisal was required as a condition of loan approval.

The following are not reported anywhere on your taxes.

1. Appraisal Fee
2. Credit Report
3. Flood Certification
4. Tax Service Fee
7. Title - Lender's Title Insurance
12. Recording Fees (Mortgage)
If this property is business property, then the above costs are amortized and deducted (not depreciated) over the life of the loan. But for personal property it's not reported anywhere on your tax return.
Costs associated with acquisition of the property are added to the cost basis of the property. Examples would include the recording fees paid at the courthouse to remove the seller's name from the deed and replace it with the buyer's name.

For what you provided, that would include:

5. Title - Courier Fee
6. Title - Endorsment Fee
8. Title - Notary Fees
9. Title - Other
10. Title - Recording Service Fee
11. Recording Fees (Deed)
Generally, none of this comes into play until the tax year one of three things happens in  your life.
1. You convert the property or any part of it to a rental or some other type of business use. (such as a home office)
2. You sell the property
3. You die.

5 Replies
Level 15
Dec 22, 2022 1:55:45 AM

everything from #5 through #12. the others are non-deductible personal expenses. 

Level 15
Dec 22, 2022 2:41:37 AM

@Yoyoguy  I would also exclude  #7 and #12 - those relate to a mortgage and can not be part of the basis.  

 

So, 5,6,8,,9,10, 11 can be part of the basis. 

 

#1-#4 are also relatead to the mortgage which is why they are excluded, 

Level 15
Dec 22, 2022 7:15:20 AM

Assuming this purchase was for your primary residence or a 2nd home and not any type of business property (such as rental property).

Those costs associated with acquisition of the loan are flat out not claimed anywhere on your tax return. Examples would include loan application fees and appraisal fees if an appraisal was required as a condition of loan approval.

The following are not reported anywhere on your taxes.

1. Appraisal Fee
2. Credit Report
3. Flood Certification
4. Tax Service Fee
7. Title - Lender's Title Insurance
12. Recording Fees (Mortgage)
If this property is business property, then the above costs are amortized and deducted (not depreciated) over the life of the loan. But for personal property it's not reported anywhere on your tax return.
Costs associated with acquisition of the property are added to the cost basis of the property. Examples would include the recording fees paid at the courthouse to remove the seller's name from the deed and replace it with the buyer's name.

For what you provided, that would include:

5. Title - Courier Fee
6. Title - Endorsment Fee
8. Title - Notary Fees
9. Title - Other
10. Title - Recording Service Fee
11. Recording Fees (Deed)
Generally, none of this comes into play until the tax year one of three things happens in  your life.
1. You convert the property or any part of it to a rental or some other type of business use. (such as a home office)
2. You sell the property
3. You die.

Level 3
Dec 22, 2022 8:35:13 AM

Thank you all. I also got lender credit from bank. Would that credit affect tax basis while I claim the above?

Level 15
Dec 22, 2022 9:02:21 AM

@Yoyoguy - see your other post; I answered it there