Capital gains

[pjmac32]

We own a house in Parker, CO and a condo in Boulder, CO. We purchased the condo in 2009 so our kids could attend college. One child is still living in the condo rent free. We have never rented the condo but are planning to sell it. Will we have to pay capital gains tax? Is the condo considered a second home since it is not a rental and is occupied by a family member? We paid $155,000 and plan to sell at $410,000. We spent about $30,000 to renovate after a flood in 2013. Are real estate fees and closing costs deductible?

[rschule1]

Hi there:

For investment property, closing costs should be added to the cost of the property which increases basis, which will indirectly will lower capital gains.  So you it helps. An argument could be made to reduce the sales price by closing costs, but in my opinion, the full sales price should be reported on the tax return.

[Cindy4 · Accepted solution]

Hi @pjmac32 !

A second home is usually considered an investment.  Here is an IRS reference:

https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/property-basis-sale-of-home-etc/prope...

If you're using TurboTax, here are the steps to enter the information:

https://ttlc.intuit.com/turbotax-support/en-us/help-article/real-property/enter-sale-second-home-inh...

Some of the closing costs, selling expenses, and improvements are considered as part of the basis and can reduce the capital gain.  This IRS publication details what is included in basis:  https://www.irs.gov/forms-pubs/about-publication-551

If you are a TurboTax user, you will be guided to answer questions and TurboTax will calculate your gain or loss based on your entries.  

Hope this helps!

Cindy

[JohnJ4]

Real Estate Closing cost and any renovations or improvements done to the property will increase your tax basis in the property and reduce any capital gain on sale. I recommend you review all your information related to this house to make sure no item is missed that would increase your property tax basis.