Taxes · IRS Publication 523Home cost basis: which closing costs and improvements count when you sell

When you sell your main home, gain is figured from your adjusted basis – roughly what you paid plus improvements – so the closing statement from your purchase matters years later. Under IRS Publication 523 (2025), your cost includes the down payment and any debt such as a mortgage or notes to the seller or builder, plus certain settlement fees and closing costs: abstract of title fees, charges for installing utility services, legal fees (including the title search and preparing the sales contract and deed), recording fees, survey fees, transfer or stamp taxes, and owner's title insurance. Amounts placed in escrow for future taxes and insurance aren't settlement costs. You can't include fire and casualty insurance premiums, rent or utilities for occupying the house before closing, or charges for getting the mortgage – mortgage insurance premiums (including VA funding fees), loan assumption fees, the credit report, a lender-required appraisal and points – nor refinancing fees. You generally reduce basis by points the seller paid for you. Seller costs that you agreed to pay and weren't reimbursed add to your basis – real estate taxes owed through the day before the sale, back interest, the seller's recording or mortgage fees, the seller's repair obligations and the seller's real estate commission. After you buy, improvements that add value, prolong the home's life or adapt it to new uses add to basis: additions such as a bedroom, bathroom, deck or garage; systems like heating, central air and wiring; a new roof, siding, insulation, a septic system, built-in appliances, kitchen modernization, landscaping, a driveway, fence or pool. Repairs and maintenance that only keep the home in good condition – painting, fixing leaks, filling cracks – don't count unless done as part of an extensive remodel; nor do improvements no longer part of the home or with a life of less than a year. If you took energy tax credits or utility subsidies for improvements in your basis, subtract them.