refinanced home

massachusetts

my home was refinance prior to selling it…do I use the amount of the refinanced for the sale of the house. I lived in my main home for 40 years.

TriciaD

Hello massachusetts,

It sounds like you’re asking whether the refinanced loan amount is used when figuring the gain or loss on the sale of your home or what amount to enter as the purchase price.

Your purchase price is the total amount you paid to purchase your home. This includes, but isn't limited to, the following:

• The amount you paid for your home, including any down payment and any amount borrowed to pay for the home. If you built your home, include the cost of the land plus the amount it cost you to complete the house.
• Any settlement fees or closing costs, except for financing related costs (such as seller-paid points).
• Any real estate taxes or other costs you paid on behalf of the seller that were never paid back by the seller.

When you sell your home, the amount of your mortgage (whether original or refinanced) doesn't directly determine your gain or loss for tax purposes. Instead, the IRS looks at:

• Selling price (what you sold the home for)
• Selling expenses (e.g., real estate commissions, closing costs)
• Adjusted basis (generally what you paid for the home plus the cost of improvements, minus any depreciation if applicable)

The refinanced loan amount is simply the debt you owed — it doesn’t change your basis unless part of the refinance was used for capital improvements (which could increase your basis).