Sale of Rental Property - Tax Basis for Loan Costs

Forum|Forum|3 years ago
February 18, 2023
2 replies
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Hello, I purchased my back in 2014 and lived in it until 2018, when I converted it in a rental property. At the time, I didn't include the loan costs (origination charge, appraisal, etc) in my tax basis for the property. I sold the rental property in 2022, am I allowed to add the loan costs to the tax basis?

AmeliesUncle

No, loan costs are not added to Basis.

SantinoD

Some settlement fees and closing costs you can include in your basis are:

Abstract fees (abstract of title fees),
Charges for installing utility services,
Legal fees (including fees for the title search and preparing the sales contract and deed),
Recording fees,
Survey fees,
Transfer or stamp taxes, and
Owner's title insurance.

Settlement costs don’t include amounts placed in escrow for the future payment of items such as taxes and insurance.

Some settlement fees and closing costs you can’t include in your basis are:

Fire and casualty insurance premiums,
Rent for occupancy of the house before closing,
Charges for utilities or other services related to occupancy of the house before closing,
Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994),
Charges connected with getting a mortgage loan, such as:
1. Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs),
2. Loan assumption fees,
3. Cost of a credit report,
4. Fee for an appraisal required by a lender,
5. Points (discount points, loan origination fees), and
Fees for refinancing a mortgage.