17 Jul What deductions you can take on home sale
Q. What expenses can I deduct when I sell my home? And if I don’t have receipts from 20 years ago, what can I do? Is estimating allowed?
A. Selling a home can be a big job, and you don’t want to make mistakes with deductions.
Items that you take into account when selling your home fall into two major categories: — expenses of sale and adjusted cost basis — said Cynthia Fusillo, a certified public accountant with Lassus Wherley in New Providence.
Both have the same net effect which is to reduce the amount of gain realized on the sale.
“Selling expenses include sales commissions, such as those paid to a realtor, advertising costs, legal fees, and points or other loan charges that you assumed but were really the buyer’s responsibility,” she said.
Then there’s the adjusted cost basis category. These include the original cost of the home, plus amounts spent on capital type improvements and renovations, Fusillo said. These are different than amounts spent on repairs and maintenance.
“Generally, capital type improvements extend the life of the home,: Fusillo said.
IRS Publication 523, Selling Your Home, also lists other costs you can include in basis. They include abstract fees, charges for installing utility services, recording fees, survey fees, transfer or stamp taxes and owner’s title insurance.
Fusillo said it’s true that receipts are the best resource and defense in the event your return is audited for the year of sale. However, it is a very common occurrence to not have receipts that span ten, twenty, thirty years or even more.
“You should use your best estimate for items you know you incurred,” she said. “In the event you are audited, an examiner should be willing to accept reasonable estimates for expenditures where no receipt exists.”
Email your questions to moc.p1606926619leHye1606926619noMJN1606926619@ksA1606926619.
This story was first posted in July 2015.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.