When selling your house, you’ll likely incur various expenses. These costs are usually one-time, and in most cases, they’re not eligible for the home seller tax deduction. However, some of these expenses might be deductible if they meet the IRS rules concerning the sale of your home.
Repairs and Improvements
Repairs and improvements to your house, if sold as-is, are not tax-deductible. If you make improvements to your property and plan to sell your house “as is,” you can’t deduct the costs of the improvements. However, if you plan to sell your house with the assumption that the seller will repair the issues, you might be able to deduct the costs of repairs.
The key is that the repairs must be substantial. According to the IRS, repairs might be substantial if they cost you more than 10% of the house’s original cost, including the cost of land. Remember that substantial repairs are only deductible if they are important to the health and safety of the house.
Commissions and Fees
In most cases, the real estate commission is not tax-deductible. However, there are a few situations when real estate commission is deductible. For example, if you sell your property at a loss, you can deduct the cost of the commission.
However, the IRS caps the amount of the deduction at $3,000. In addition, if you use a fee-based real estate agent, you can deduct the fee as long as it is an expense necessary for the sale.
If you plan to sell your house, assuming that the buyer will pay for repairs, you might want to get it appraised. If you sell your house for less than its appraised value, you can deduct the cost of the appraisal. Remember that you can only deduct the cost of an appraisal if the house sells for less than the appraised value.
If you sell your house “as is,” you can deduct the costs of the settlement. If you sell your house with the assumption that the buyer will repair the issues, you cannot deduct the settlement costs.
The key is that the settlement must be substantial. In most cases, settlement costs are substantial if they cost you more than 10% of the house’s original cost, including the land cost.
Although you can’t deduct the costs associated with selling a home, there are a few specific situations in which you might be able to do so, such as the ones stated above.