Which home-sale costs matter for your tax records?
IRS publications sort closing costs three ways: some lower the amount realized, some were added to basis when you bought, and some do neither.
September 30, 2026 · 5 min read
A closing statement can have a long list of charges, but the IRS doesn't treat all of them the same way.
For tax records, home-sale costs generally fall into three groups. Some costs of selling reduce the amount realized. Some costs from when you bought the home were added to its basis. Others, including many loan charges and deposits, usually do neither.
Knowing which group a cost belongs to also tells you which records are worth keeping.
Why the groups matter
Publication 523 calculates the gain on a home sale in two main steps.
First, you subtract selling expenses from the selling price to get the amount realized. Then you subtract the home's from that amount to get the gain or loss.
That means every cost on a settlement statement either affects one of those numbers or sits outside the calculation. Our home cost basis calculator adds up the basis side from your own papers.
Whether that gain is taxable is a separate question. IRS Topic 701 says qualifying sellers may exclude up to $250,000 of gain on a main home, or up to $500,000 on a joint return, if they meet the ownership and use tests.
Our companion article, can sellers deduct closing costs from their taxes?, explains why selling expenses generally aren't separate deductions.
Group 1: costs of selling
These costs reduce the amount realized.
Worksheet 2 in Publication 523 describes selling expenses as costs directly tied to selling the home. Examples include:
- Sales , including a real estate agent's commission
- Advertising fees
- Legal fees
- points or other loan charges the seller paid that would normally have been the buyer's responsibility
- Transfer taxes, stamp taxes, and other fees paid by the seller
- Other costs directly connected with selling the home
Transfer taxes are a good example of why it matters who paid. Publication 523 says a seller who pays them can treat them as selling expenses. If the buyer pays them, they generally become part of the buyer's basis instead.
Who usually pays varies by state and sometimes by county. Our closing costs by state page breaks that down.
Group 2: costs from when you bought the home
Some costs from the original purchase became part of the home's basis. Publication 523 and Publication 551 list examples such as:
- Abstract of fees
- Charges for installing utility services
- Legal fees connected with the , , or
- Survey fees
- Transfer or stamp taxes paid by the buyer
- Owner's
- Certain amounts the seller owed that the buyer agreed to pay, such as back taxes or the seller's commission
The basis can also go up when you make certain improvements. Publication 523 gives examples such as adding a bedroom, bathroom, deck, garage, patio, landscaping, or driveway.
It can go down too. Publication 551 says things like or casualty loss deductions can reduce basis.
That's one reason records from years before the sale can still matter when you eventually sell.
Group 3: costs that usually do neither
Not every charge on a settlement statement affects gain or basis.
Publication 551 says costs of getting a loan generally aren't added to basis. Examples include points, loan , , a credit report, and an the lender required.
There's one extra wrinkle with seller-paid points from when you bought the home. Publication 551 says your basis is reduced by those points.
Publication 523 also excludes some everyday from basis, including fire and casualty insurance, rent paid before closing, and money placed in escrow for future taxes and insurance.
Your mortgage payoff is another good example. Paying off the remaining loan reduces the cash you receive from the sale, but Publication 523 doesn't list the payoff itself as a selling expense. The proceeds calculator shows it separately for that reason.
Property taxes have their own rules
The prorated line deserves a closer look because it can affect more than one part of the calculation.
Publication 523 says a seller who itemizes may deduct the real estate tax for the part of the year they owned the home. Its example uses a $620 annual tax bill and a sale on May 6. The sellers owned the home for 125 days, so their share was $212.
Because the buyers paid the entire tax bill in that example, the sellers also added their $212 share to the selling price.
Publication 523 also says that if you received Form 1099-S, you start with the real estate tax you actually paid that year and subtract the buyer's share shown in box 6.
Records people commonly keep after closing
The first is the settlement statement or from the sale. The CFPB describes the Closing Disclosure as a five-page form. Page 3 includes adjustments for things the seller paid ahead of time or left unpaid, so it can be useful later when sorting out taxes.
Form 1099-S belongs with it, if you received one. Publication 523 says gross proceeds are reported in box 2. If you didn't receive the form, the IRS points to your transaction documents for the total amount received.
It can also be useful to keep the settlement statement from when you originally bought the home. Publication 523 says that document should show many of the fees connected with the purchase.
Receipts and invoices for improvements matter for the same reason. So do records for commissions, advertising, legal fees, and other selling costs.
So do the property tax records for the year of the sale, which show how the tax was split between buyer and seller.
How long should you keep the records?
IRS Topic 305 says to keep records related to property until the period of limitations expires for the year you dispose of it.
Publication 551 also says to keep accurate records of anything that affects the property's basis.
How long that means for a particular record can depend on your own tax situation, so a tax professional can give you a more specific answer.
What records should I keep after selling my home?
Common records include the sale's settlement statement or Closing Disclosure, any Form 1099-S, the settlement statement from when you bought the home, receipts for improvements and selling costs, and property tax records for the year of sale. IRS Topic 305 says to keep property records until the period of limitations expires for the year you dispose of the property.
Which increase my home's tax basis?
Publication 523 lists several costs from the original purchase, including abstract fees, utility installation charges, certain legal fees, recording fees, survey fees, transfer taxes paid by the buyer, and owner's title insurance. Publication 551 says costs of getting a loan generally aren't added to basis.
Are transfer taxes deductible or added to basis?
It depends on who paid them. Publication 523 says transfer and stamp taxes paid by the seller aren't separate deductions, but they can be treated as selling expenses. If the buyer pays them, they generally become part of the buyer's basis.
Does the settlement statement show what I can claim for taxes?
It shows the charges, but it doesn't decide how the IRS treats them. Publication 523 and Publication 551 sort the charges based on what they were for. Some are selling expenses, some were added to basis, and some don't affect either number.
Are loan fees added to basis?
Usually not. Publication 551 says costs of getting a loan, including points, origination fees, mortgage insurance, credit reports, and lender-required appraisals, generally aren't added to basis. If the seller paid points for you when you bought the home, Publication 551 says those points reduce your basis.
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