Determining house cost basis. Is referencing Zillow acceptable?

[sunsetting101]

How do I prove/demonstrate my house cost basis when I fill out the tax forms after I sell a home? I am preparing in advance for that day.

So I have refinanced my first loan and my home loan was repackaged and sold to another loan company. I have not kept good records of my first loan with my first loan company. Can I just go to Zillow and print out the home purchase price and reference that as my cost basis? Is there something "more official" that I'm supposed to do?

Thanks in advance.

[stungerz]

I would probably feel comfortable doing that. Perhaps check another site or two to confirm.

I also know that you can get that info from the county and some counties have it online.

[SlowMovingInvestor]

There may be slight variations, but I think Zillow gets its numbers from local government land records. Every state maintains records of sales prices and deeds (mostly at the county level). You can check your local land records office for the primary source.

And yes, many/most are online.

[windaar]

Maybe also check realtor.com as a secondary source. The numbers are from official records and should be reliable.

[crefwatch]

The sale of the mortgage is unrelated to the basis. Do you have the 14" Settlement statement from when you signed the papers? Can you go online for your county's real estate deed recordings? That is a public record, no identity problems.

[Olemiss540]

It's only acceptable in a "helps you sleep at night" way, not a "I've been audited by the feds and am going to use this as backup in my audit proceedings" way I vote.

[GuyInFL]

How do I prove/demonstrate my house cost basis when I fill out the tax forms after I sell a home? I am preparing in advance for that day.

So I have refinanced my first loan and my home loan was repackaged and sold to another loan company. I have not kept good records of my first loan with my first loan company. Can I just go to Zillow and print out the home purchase price and reference that as my cost basis? Is there something "more official" that I'm supposed to do?

Thanks in advance.

I'd use the online county records as well. Of course you only need to show you made less than 250K if you are single or 500K for MFJ to be tax free.

[Chardo]

Does one need to provide documentation of basis when filing, or only if audited?

[feh]

The sale of the mortgage is unrelated to the basis.

+1

And as others have said, your county web site will tell you what the sale price was.

[lobsterman2112]

Remember to keep records of any permanent modifications you made to the house (ie: renovations, adding a patio, finishing a basement). They all add to the cost basis when you sell.

[Asyouwish]

You save your home purchase paperwork when you buy. I lived in the same house for 38 years. Always had a “house” folder with important papers.

As others said, the mortgage and refinance are irrelevant. The IRS only needs Selling price, Cost Basis, Net proceeds. The Publication can provide the details on adjusted cost basis calculation.

Details are not attached to a tax return. Yes, in an audit you may be asked to provide documentation. Just like any audit.

[montanagirl]

Does one need to provide documentation of basis when filing, or only if audited?

You report your basis but back it up if audited

I'd think the settlement docs would have the price?

[Watty]

If you used a real estate agent to purchase the house there is a chance that they might still have a copy of the closing statement if it was not too long ago.

A big question is how much difference it makes.

Keep in mind that if you are not to near exceeding the homeowners capital gains exemption then being off some may not be all that important and even if you get audited it would likely not make a difference as long as your estimate was reasonable.

If you are exceeding the homeowners capital gains exemption and will pay 20% in the federal and state capital gains tax then being off by $10,000 could cost you $2,000. In that case it would be best to get an accountant involved so help dig through the public records and any paperwork you have to figure it out. They may also be able to identify some home improvements which would increase the cost basis.

[NiceUnparticularMan]

Are you asking for something like an inherited house with a stepped up basis?

I am not an attorney in this area, but my lay understanding is typically the executor should do this (unless the property is sold right away, in which case they can simply take the sold price as evidence of the stepped-up value). They have some options. They can use the tax assessment, although that could be low, particularly if it is an older assessment. They could pay for a professional appraisal. Finally, they could do something like get multiple written statements from local realtors, which they may give for free (particularly if you might soon use a realtor to sell the property). This last method is going to be potentially more subject to an IRS challenge if you are either talking about a pretty expensive property or multiple properties, including because realtors are known to inflate estimates as a way of trying to get your business.

If for some reason the executor failed to do this when the property was inherited, you can likely still hire a professional appraiser to appraise the property's value as of a prior date. Or, again, you can use the tax assessment as of that date, but that might be low. Or, again, you can get written statements from realtors, understanding the potential risk.

[White Coat Investor]

How do I prove/demonstrate my house cost basis when I fill out the tax forms after I sell a home? I am preparing in advance for that day.

So I have refinanced my first loan and my home loan was repackaged and sold to another loan company. I have not kept good records of my first loan with my first loan company. Can I just go to Zillow and print out the home purchase price and reference that as my cost basis? Is there something "more official" that I'm supposed to do?

Thanks in advance.

If you're going to owe taxes try to find records of all the improvements you did to the home while you were in there. Those are additions to cost basis. So are any purchasing fees/taxes. That can reduce the amount you may owe in capital gains taxes. If you won't owe taxes, just use the purchase and sale prices. Why do you care about the loan? That has nothing to do with basis.

[exodusNH]

How do I prove/demonstrate my house cost basis when I fill out the tax forms after I sell a home? I am preparing in advance for that day.

So I have refinanced my first loan and my home loan was repackaged and sold to another loan company. I have not kept good records of my first loan with my first loan company. Can I just go to Zillow and print out the home purchase price and reference that as my cost basis? Is there something "more official" that I'm supposed to do?

Thanks in advance.

Your locality tracks sales. Many places (at least around here) use Vision Appraisal. If you search for "my town, mystate vision appraisal", you can look at the last few property transactions.

That will tell you exactly what you paid for it.

[mariezzz]

PUblication 523is here: https://www.irs.gov/forms-pubs/about-publication-523

See section "Reporting Gain or Loss on Your Home Sale".
For primary residence who meet the "eligibility test": Most people won't have a taxable gain on their primary residence and won't have anything to report on their taxes, unless home has appreciated significantly in value, beyond the exclusion (that they qualify for) for a primary residence.

• If your home did appreciate quite a bit in value, then you need to look at what factors into determining the cost basis - Pub523 has details. If your primary residence appreciation is well under the exclusion you qualify for (250K per legal owner who qualifies for the exclusion - can be more than 2 owners), then cost basis doesn't really matter, and documentation from an official government source (like your county assessor's office) of the purchase price and sales price is likely enough. But for others reading this: as others here have said, you should keep track of paperwork for real estate purchases, sales, and anything that may affect your cost basis.
  Worksheet 2 walks you through calculating cost basis if your home appreciated in value enough that you may have exceeded the exclusion amount you qualify for.

[vested1]

I would like to add for the benefit of the OP, that going forward, retain all records of purchase, sale, and improvements, because you never know when you will need them.

When my wife and I sold our house in 2019 I had records for the original mortgage and all improvements. The profit was just below capital gains limits after the commission was paid to the realtor, so we didn't need the improvement records. After the sale was finalized we moved and bought a new house for cash with the proceeds, so as part of decluttering I threw away all the old improvement paperwork from the old house.

Fast forward 2 years and 2 months and we sold that house and bought another more appropriate one for our ages, realizing a 51% profit, but I hadn't kept all the records of the 40k remodel, throwing them away after we moved, because I knew we were only going to use about half of the 500k CG exemption.

Our tax preparer for the following year, who had her own tax preparation business for 20 years, said we owed 27k in capital gains taxes (if we could prove we spent 40k on improvements) because (she said) you can only take the capital gains exemption once every 7 years. Of course she was wrong, in that you only have to live in the house for 2 of the last 5 years to qualify for the exemption.

Luckily I was able to prove she was wrong and we got the exemption. I wonder about the accuracy of her other client's tax returns however. Don't be me. Keep your records until you are sure you won't need them.

[mariezzz]

Our tax preparer for the following year, who had her own tax preparation business for 20 years, said we owed 27k in capital gains taxes (if we could prove we spent 40k on improvements) because (she said) you can only take the capital gains exemption once every 7 years. Of course she was wrong, in that you only have to live in the house for 2 of the last 5 years to qualify for the exemption.

Wow. I cannot believe a tax preparer was so ignorant. I would have looked into whether there was a state licensing office or any way to report her. That's a major, major error, for something where the IRS guidelines are very clear. This is why I have always done my own taxes (without tax software) - my situation has never been that complicated, and while at times I have had to do some diligent research to make sure I understand some detail correctly, it pays off in greater knowledge over the long term.

[shess]

There may be slight variations, but I think Zillow gets its numbers from local government land records. Every state maintains records of sales prices and deeds (mostly at the county level). You can check your local land records office for the primary source.

And yes, many/most are online.

I did some spot checks on relatives in various states and in most cases I can only get the last few years of property-tax assessment information in online systems, I can't see back to the purchase. My guess is you might have to make an in-person visit to get that info in those cases. Of course, every county will vary, and it's surely worth spending five minutes to figure that out up front.

[vested1]

Our tax preparer for the following year, who had her own tax preparation business for 20 years, said we owed 27k in capital gains taxes (if we could prove we spent 40k on improvements) because (she said) you can only take the capital gains exemption once every 7 years. Of course she was wrong, in that you only have to live in the house for 2 of the last 5 years to qualify for the exemption.

Wow. I cannot believe a tax preparer was so ignorant. I would have looked into whether there was a state licensing office or any way to report her. That's a major, major error, for something where the IRS guidelines are very clear.

Yeah, I think she was adding 2 to 5 to arrive at the number 7.

Not to derail this thread, but we got a different tax preparer from a nationally known company this year and had our taxes filed yesterday. She was an EA (Enrolled Agent), one step below a CPA. She said "Congratulations, you're getting an IRS refund of $19". I had estimated what our refund would be by adding up income and taxes from our 1099's and saw she was off about 10k on income and about 2k on taxes, and pointed that out. She thanked me and rechecked her numbers, which changed our refund to almost $1,800 on federal taxes.

I see turbotax in my future.

[pshonore]

There may be slight variations, but I think Zillow gets its numbers from local government land records. Every state maintains records of sales prices and deeds (mostly at the county level). You can check your local land records office for the primary source.

And yes, many/most are online.

I did some spot checks on relatives in various states and in most cases I can only get the last few years of property-tax assessment information in online systems, I can't see back to the purchase. My guess is you might have to make an in-person visit to get that info in those cases. Of course, every county will vary, and it's surely worth spending five minutes to figure that out up front.

Property tax assessment is a bad number anyway. In the town where I live, assessments are done every five years even though a new house might sell for 20% more than an existing identical house and both houses would have the same assessment. The only figure to use is what's on the property deed which should available for public view. However even that is missing sometimes for older deeds when "valuable consideration" was used. In some cases there are tax stamps on the deed. Usually the final sales offer from the contract is what goes on the deed. I attended many closings as an agent and never got a copy of the closing statement (the HUD-1 form in the old days). YMMV

[crefwatch]

More directly: The Assessed Value of the house has nothing to do with the number you need. It is a distraction from the subject of this thread. Do not research the property tax records unless your personal annual income tax deductions are involved. But you didn't ask about that.

[Beachey]

Our tax preparer for the following year, who had her own tax preparation business for 20 years, said we owed 27k in capital gains taxes (if we could prove we spent 40k on improvements) because (she said) you can only take the capital gains exemption once every 7 years. Of course she was wrong, in that you only have to live in the house for 2 of the last 5 years to qualify for the exemption.

Wow. I cannot believe a tax preparer was so ignorant. I would have looked into whether there was a state licensing office or any way to report her. That's a major, major error, for something where the IRS guidelines are very clear.

Yeah, I think she was adding 2 to 5 to arrive at the number 7.

Not to derail this thread, but we got a different tax preparer from a nationally known company this year and had our taxes filed yesterday. She was an EA (Enrolled Agent), one step below a CPA. She said "Congratulations, you're getting an IRS refund of $19". I had estimated what our refund would be by adding up income and taxes from our 1099's and saw she was off about 10k on income and about 2k on taxes, and pointed that out. She thanked me and rechecked her numbers, which changed our refund to almost $1,800 on federal taxes.

I see turbotax in my future.

I had a similar experience the one year I used a CPA (the first year I had to do multi-state taxes and thought it would be complicated). I questioned something and the answer I go was that is what the computer program said. Last time I used a CPA.

[cchrissyy]

i'm not sure what loan documents have to do with anything. maybe you want to deduct the closing costs? i'm not sure how that works. but if that is what you mean, the only way to get those lost documents is to reach out to the original lender.

but if you don't mean to ask about the loan costs then the answer is yes it's fine with the IRS if you don't deduct everything you possibly could, and you can simply use the purchase price as the cost basis. is that your question, about if it is allowed to keep it that simple? and sure, if you are saying you don't remember the number you can probably find it on zillow.

[sunsetting101]

The sale of the mortgage is unrelated to the basis. Do you have the 14" Settlement statement from when you signed the papers? Can you go online for your county's real estate deed recordings? That is a public record, no identity problems.

I was trying to provide a document that stated my first loan amount and present that as my original cost basis. After posting, luckily I was able to find that documentation stored in a location I don't remember placing.

[sunsetting101]

Remember to keep records of any permanent modifications you made to the house (ie: renovations, adding a patio, finishing a basement). They all add to the cost basis when you sell.

Yeah. I have my last 20 years of tax returns but I didn't have a folder for my house. I must have been very busy then. Well, there will be a folder.

[cchrissyy]

The sale of the mortgage is unrelated to the basis. Do you have the 14" Settlement statement from when you signed the papers? Can you go online for your county's real estate deed recordings? That is a public record, no identity problems.

I was trying to provide a document that stated my first loan amount and present that as my original cost basis. After posting, luckily I was able to find that documentation stored in a location I don't remember placing.

the opening loan balance is not the cost basis

[sunsetting101]

How do I prove/demonstrate my house cost basis when I fill out the tax forms after I sell a home? I am preparing in advance for that day.

So I have refinanced my first loan and my home loan was repackaged and sold to another loan company. I have not kept good records of my first loan with my first loan company. Can I just go to Zillow and print out the home purchase price and reference that as my cost basis? Is there something "more official" that I'm supposed to do?

Thanks in advance.

If you're going to owe taxes try to find records of all the improvements you did to the home while you were in there. Those are additions to cost basis. So are any purchasing fees/taxes. That can reduce the amount you may owe in capital gains taxes. If you won't owe taxes, just use the purchase and sale prices. Why do you care about the loan? That has nothing to do with basis.

My thought process was first loan = house cost = original cost basis. But I see there may have been a down payment that wasn't included. Regardless, I have the paper work now and it shows the property value. I'll have to spend some time to document the expenditures to determine current cost basis.

[Artsdoctor]

Your cost basis has nothing to do with Zillow, bank appraisals, or mortgage information. The cost basis is the purchase price of the house, some of the costs associated with buying the house, and home improvements. You need records for all of this and you can't guess or estimate on any of it. You don't include any of the documentation with your tax return but you may need it if the IRS asks for it.

https://www.irs.gov/faqs/capital-gains- ... home-etc-3