This isn’t quite the same subject of my other thread in P&E about capital gains and real estate profit, so I decided to start another thread.
I understand that, having excluded the permissible amount from the taxable capital gain after a home sale, you can still subtract many home-selling expenses from the remaining profit. Such as the agent’s commission, escrow fees, staging fees, document recordation fees, etc.
We have a new law in our town. Before we sell a home, we must pay an approved plumber to inspect our lateral sewer line. Will the cost of this inspection (not any repairs) be one of the home-selling expenses that we can subtract?
This new law has a lot of this town’s residents pissed off, as the list of plumbers who are approved to do the inspection is short and there’s a backlog.
The inspection is part of the expenses of selling a home. So, yes it can be subtracted.
Thank you. That makes sense to me, as it’s required before a sale.
Yes, if you incur an expense specifically to sell your home, you can generally include that amount in the selling costs. You obviously need to be able to easily tie it to the sale of the home, but if there’s a clear causal connection between the reason the expense was incurred and the eventual sale of the home, it should be able to be included. If you didn’t bother repainting anything because you didn’t care how it looked while you owned it, you can’t include the cost of painting in the selling expenses, even if the entire reason you did it was to sell your home, because by itself the painting had nothing to do with the sale of your home. Paying for a plumbing inspection that’s required to sell the home is clearly closely related to selling the home.
The IRS has a worksheet for selling expenses and they include the following:
Sales Commissions
Advertising
Legal fees
Things are supposed to be the buyer’s responsibility that you agree to pay (essentially a price reduction expressed differently)
and the catch-all “Any other fees or costs to sell your home”.
This plumbing inspection is clearly in the last category, whereas the cost of sprucing up the place before selling is not, nor is it any other category. Most closing costs fall into the last category as well.