Dear Monty: We recently sold our home. We have prepared and filed our tax returns in the past. Next year for our 2023 return, we are considering having an accountant file our return. Adding a home sale into the tax forms is a bit intimidating. Our primary concern is regarding what is tax deductible when selling a home. We would appreciate your insights.
Monty’s Answer: Interpreting the tax code can be a challenging task. Selling a home is likely the most complicated task in the code for the average taxpayer. IRS Publication 523 is one of many publications published by the IRS. It is a guide to inform homeowners who are selling their homes.
A Quote From The Tax Guide
Here is a quote in the guide referring to your concern: “There is no tax deduction for transfer taxes, stamp taxes, or other taxes, fees, and charges you paid when you sold your home. However, if you paid these amounts as the seller, you can treat these taxes and fees as selling expenses. If you pay these amounts as the buyer, include them in your property cost basis.”The guide goes on with this language: “a. Any sales commissions (for example, a real estate agent’s sales commission), b. Any advertising fees, c. Any legal fees, d. Any mortgage points or other loan charges you paid that would normally have been the buyer’s responsibility, e. Any other fees or costs to sell your home. These are your selling expenses.”
A Legal Opinion
Nolo.com, a source of legal information, has produced a list of home sale expenses incurred when selling your home: advertising, appraisal fees, attorney fees, closing fees, document preparation fees, escrow fees, mortgage satisfaction fees, notary fees, points paid by the seller to obtain financing for the buyer, real estate broker’s commission, recording fees (if paid by the seller), costs of removing title clouds, settlement fees, title search fees, and transfer or stamp taxes charged by city, county, or state governments.Statement ‘e’
The statement “Any other fees or costs to sell your home” mentioned in the IRS publication 532 requires a bit of logic to gather a clear vision of what else may be permissible. The following thoughts are logical but only to be relied upon by a reader seeking an opinion from your legal adviser or a Certified Public Accountant (CPA).Every home has multiple expensive components. For example, home inspections often turn up defects in the inspection process. If the inspector were to tag the roof at the end of its useful life and recommend replacing it, it might qualify as a cost to sell your home. Suppose the inspection is at the request of a buyer who has negotiated a contract, and the seller agrees to replace it or credit the cost from the sale price. In that case, it seems clear that it could be expensed. Then, can the expense of a new roof qualify if the seller received the same tag in a presale home inspection? Some home sellers replace the roof automatically before they put the home on the market. Can that be considered a cost of sale?
