Hi,
I have read that seller paid points are deductible by buyer even though seller paid, but can’t find any info on other settlement charges.
I bought a home at an auction (that I rehabbed and sold in less than a year). The doc prep, title insurance, etc, were paid from sellers funds according to the hud settlement statement.
Are these adjustments to my basis, or deductible by me too?
Thanks!
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No, you can’t adjust your basis for something you didn’t pay.
Of course not! You can only deduct items that YOU paid, not that were paid by someone else. Each party to the transaction gets THEIR deductions or basis adjustments ONLY.
Settlement fees or closing costs. When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing).
Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance.
Some of the settlement fees or closing costs that 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,
Owner’s title insurance, and
Any amounts the seller owes that you agree to pay, such as:
Certain real estate taxes (discussed later),
Back interest,
Recording or mortgage fees,
Charges for improvements or repairs, and
Sales commissions.
Some settlement fees and closing costs you cannot include in your basis are:
Fire 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:
Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs),
Loan assumption fees,
Cost of a credit report,
Fee for an appraisal required by a lender, and
Fees for refinancing a mortgage.
Real estate taxes. Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart.
IF… AND… THEN the taxes…
you pay taxes that the seller owed on the home up to the date of sale the seller does not reimburse you are added to the basis of your home.
the seller reimburses you do not affect the basis of your home.
the seller pays taxes for you (taxes owed beginning on the date of sale) you do not reimburse the seller are subtracted from the basis of your home.
you reimburse the seller do not affect the basis of your home.