Question

Improvements to land in cost basis

Forum|Forum|3 years ago
April 16, 2023
1 reply
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I purchased land over 20 years ago where I parked a park model RV for us. Over the years I made improvements to the land, such as retaining wall, patio, etc. I sold that land this year and I believe for the sale, I can include the improvements in the cost basis. Do I simply add up the cost of my improvements plus the original purchase price of the land and that becomes my cost basis for taxes? Or any advice on where to capture this information? Please note, this was not rental property.

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PattiF

Yes, you are correct that you add the cost to the original purchase price to find the cost basis.

And some expenses that are listed on the settlement statement can be added to the basis. These include:

Title fees
real estate commissions
documentary stamps
credit report costs
costs of an abstract
transfer taxes
home inspection
flood certificate
attorney fees, etc.

The sale of land that was used for personal reasons is entered in the investment section even though it was not an investment property. You cannot take a loss on personal-use property. Enter this as the sale of a second home since you cannot take a capital loss on personal-use property.

Here are instructions to enter the sale:

Open or continue your return
In the search box, search for sold second home and select the Jump to link
Answer Yes on the Did you sell any stocks, mutual funds, bonds, or other investments in 2021? screen
- If you land on the Your investment sales summary screen, select Add More Sales
On the OK, let's start with one investment type screen, select Other, then Continue
On the Tell us more about this sale screen, enter the name of the person or institution that brokered the sale
On the next screen, select Second Home (choose this also for inherited homes) or Land and answer the questions to finish entering your sale

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

W

wakbomom

Further to the above discussion. Property taxes and interest paid on the note for the property - are those allowed to be added to the cost basis .... NOTE: these were not deducted on any prior years tax returns. This property was personal use, camper, lake front..... owned for 5 years and sold - I have all the purchase info, shop contsruction costs and things.... just wondering if I am also allowed to add the property taxes and interest paid on the loan to the total costs before subtracting from the price we sold at to determine total profit.

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DianeW777

No, property taxes and interest on the note or mortgage cannot be added to the cost basis. Those items are deductible expenses either on itemized deductions if the camper was used for personal purposes, or as a business expense if it were used in a income producing business activity.

See the list of items that cannot be added to cost basis for property.

Loan charges - Loan charges are part of the loan, not cost basis