Tax implications of seller paying buyer closing costs on rental

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Poppy1234
Posts: 109
Joined: Mon Aug 21, 2017 7:42 pm

Tax implications of seller paying buyer closing costs on rental

Post by Poppy1234 »

Does anyone know if buyer closing costs paid by the seller is tax deductible on a rental property? Online search wasn’t that helpful and my accountant isn’t getting back to me. :(
BogleFan510
Posts: 1039
Joined: Tue Aug 04, 2020 2:13 pm

Re: Tax implications of seller paying buyer closing costs on rental

Post by BogleFan510 »

[edit]. I now see you are seller paying buyer costs in the post title. You might restate that in the post body.

I assume any closing costs paid by the seller reduce the capital gain by increasing the effective basis of the property, just as a real estate commission does. So the benefit is a lower capital gain. There is a form that goes along with the withholding required in my state and a line for selling expenses is included. You might search for this form for your state. Traditional buyer and seller costs are not treated differently for tax purposes, what matters who actually pays. If you paid as seller, it is a seller cost.

I do not believe you are allowed to 'expense this' against income for the rental income reported for that year.

Note: I am not a tax or legal advisor on real estate. Consult a licensed professional in your state/country.
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