Can sellers deduct closing costs? What the IRS says
Mostly no, not as a deduction. IRS Publication 523 treats most seller closing costs as selling expenses that lower the gain on the sale instead.
September 30, 2026 · 4 min read
Usually, seller aren't deductions in the way people often mean.
IRS Publication 523 says transfer taxes, stamp taxes, and many other costs paid when you sell a home aren't separate tax deductions. Instead, many of them count as selling expenses. Those expenses reduce the amount realized on the sale, which can reduce the gain.
That distinction matters, but for many sellers of a main home, the gain may already fall within the federal exclusion of up to $250,000, or $500,000 on a joint return.
The common mix-up: closing costs and Schedule A
It's easy to see where the confusion comes from.
The Consumer Financial Protection Bureau describes closing costs as the upfront costs involved in getting a loan and transferring ownership. Buyers often hear about deductions for things like points or property taxes, so sellers may assume their closing costs work the same way.
Publication 523 treats them differently.
The IRS starts with the selling price, then subtracts selling expenses to get the amount realized. From there, it subtracts the home's to find the gain or loss.
So when a closing cost counts as a selling expense, it reduces the gain inside that calculation. Our home sale gain calculator runs those steps with your own numbers.
A selling expense lowers the gain. It isn't a separate Schedule A deduction.
What counts as a selling expense?
Worksheet 2 in Publication 523 describes selling expenses as costs directly tied to selling the home. Its examples include:
- Sales , including a real estate agent's commission
- Advertising fees
- Legal fees
- Mortgage points or other loan charges the seller paid that would normally have been the buyer's responsibility
- Other fees or costs paid to sell the home
Transfer taxes and stamp taxes can fit here too. Publication 523 says that when the seller pays them, they can be treated as selling expenses. If the buyer pays them instead, they generally become part of the buyer's .
Who usually pays depends on the state and sometimes the county. Our closing costs by state page shows how that varies.
Two things a seller may still deduct
Publication 523 does name a couple of items that may be deductible for a seller who itemizes.
One is real estate tax for the part of the year the seller owned the home. The IRS gives an example with a $620 annual bill and a May 6 sale. The sellers owned the home for 125 days that year, which gave them a $212 share of the tax.
The other is mortgage points the seller had been deducting over time and hadn't fully deducted yet. Publication 523 points to Publication 936 for those rules.
The property tax example has another detail worth noticing. The buyers had paid the entire year's tax bill, so the sellers added their $212 share to the selling price. The buyers could deduct the remaining $408.
Where the $250,000 and $500,000 exclusion comes in
IRS Topic 701 says qualifying sellers may exclude up to $250,000 of gain on the sale of a main home, or up to $500,000 on a joint return.
That exclusion applies to the gain. It doesn't turn closing costs into deductions.
In general, Topic 701 uses an ownership test and a use test. You usually have to have owned the home for at least 24 months out of the five years before the sale and used it as your main home for the required period.
The exclusion also generally isn't available if you used it on another home within the previous two years. Publication 523 explains partial exclusions and other exceptions.
Even when the gain ends up below the exclusion limit, selling expenses still matter because they're part of calculating the gain correctly.
Topic 701 also says a sale reported on Form 1099-S may still need to appear on the tax return even when the gain itself is excludable.
What if the home was a rental or second home?
Publication 523 is mainly about selling a main home.
Rental property, business use, and second homes can work differently. can affect the calculation, and a home used partly for business may have to be split between personal and business use.
That gets fact-specific quickly, so it's something a tax professional can answer for a particular sale.
In practice, the charges on a settlement statement tend to fall into three groups: costs that reduce the amount realized, costs that were added to basis when the home was bought, and costs that do neither.
Our companion article, which home-sale costs matter for your tax records, walks through those groups. If you're looking at the cash side rather than the tax side, the proceeds calculator shows how closing costs affect what you leave closing with.
Can I deduct closing costs when I sell my house?
Usually not as an itemized deduction. IRS Publication 523 says there's no deduction for transfer taxes, stamp taxes, or other fees paid when you sell. Many of those costs can instead be treated as selling expenses. Selling expenses reduce the amount realized, which can reduce the gain.
Do reduce ?
Publication 523 lists sales commissions, including an agent's commission, as selling expenses. Selling expenses are subtracted from the selling price to find the amount realized. The gain is then figured by subtracting the adjusted basis.
Are transfer taxes deductible to the seller?
Not as a separate deduction. Publication 523 says transfer and stamp taxes paid by the seller can be treated as selling expenses. If the buyer pays them, they generally become part of the buyer's basis instead.
Can a seller deduct property taxes in the year of sale?
Publication 523 says a seller who itemizes may deduct real estate tax for the part of the year they owned the home. Its example uses a $620 annual tax bill and 125 days of ownership, which gives the sellers a $212 share.
Does the $250,000 exclusion mean closing costs don't matter?
No. The exclusion applies to taxable gain. Selling expenses are still part of figuring that gain correctly. IRS Topic 701 says qualifying sellers may exclude up to $250,000 of gain, or up to $500,000 on a joint return.
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