Tax Year Prior to 2020: Buying & selling 2nd home

[imaroadrunner]

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. 

[RobertG]

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.

[imaroadrunner]

Which selling cost are you referring to?  There are a lot listed on the document.  

[ColeenD3]

Settlement fees and other costs.

The following settlement fees and closing costs for buying the property are part of your basis in the property.

• Abstract fees.
• Charges for installing utility services.
• Legal fees.
• Recording fees.
• Surveys.
• Transfer taxes.
• Title insurance.
• Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions

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

[imaroadrunner]

Can I claim the same fees/expenses that are listed on the document when we purchased the house?

[RobertG]

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:

• legal fees to obtain title to the home
• title search fees
• title insurance
• title recording fees
• transfer taxes, and
• survey fees.

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:

• appraisal fees
• mortgage broker's commissions
• pest inspection fees
• credit report fees
• loan fees (not points)
• mortgage insurance premiums
• commitment fees.

You also can't deduct or add to your home's tax basis hazard insurance premiums, homeowners' association fees, or utility fees.

[imaroadrunner]

What are considered commitment fees?

[MaryK4]

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.

@imaroadrunner

[imaroadrunner]

So its not any of the normal costs/fees listed on the closing documents.  What would it be called?

[ThomasM125]

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.

[imaroadrunner]

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.

[VictorW9]

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.

[imaroadrunner]

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.

[JohnB5677]

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

[imaroadrunner]

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.