Is the commission you pay a real estate agent tax deductible when you sell or buy a home?
Short answer: In most cases, no — you can’t deduct commissions as a standard tax deduction. But you may be able to factor them into your cost basis or subtract them from your sale proceeds - which may reduce your capital gains tax.

If you’re buying or selling in the Wildwoods (Wildwood, North Wildwood, Wildwood Crest, West Wildwood, Diamond Beach) or elsewhere in Cape May County, it’s smart to understand what “tax‑deductible” really means - and how commissions affect your bottom line.

What the IRS says about commissions and personal homes

• For a primary residence, commissions you pay when buying or selling are not deductible as a normal tax deduction like mortgage interest or property taxes would be. 
• That holds true whether you're the buyer or the seller: you can’t deduct the commission on your yearly tax return as an expense. 

So if you purchase a home in, say, Wildwood Crest or Diamond Beach, the commission you pay at closing doesn’t give you an immediate “tax write‑off.”

How commissions affect taxes when you sell

Even though commissions aren’t deductible as standalone itemized deductions, they play a role when you sell - because they may count as selling expenses.

• When you sell your home (primary residence, vacation home, or investment property), commissions may be subtracted from the sale proceeds - effectively lowering the amount considered “gain.”
• Other selling costs - escrow or attorney fees, advertising, title or transfer fees - may also be treated similarly. 

That said, if the home sold is your personal residence, your overall tax result may also be influenced by rules like the home sale gain exclusion (e.g., up to $250,000 for individuals or $500,000 for married couples under certain conditions) or other factors. 

What about investment or rental properties - especially along the Shore?

If you own a rental or investment property in the Wildwoods or Cape May County - for example, a seasonal rental or second home - tax rules shift a bit:

• Commissions paid when you sell a rental or investment property may also be treated as selling expenses and reduce capital gains. 
• However, commissions paid simply to acquire the property are not deducted annually as rental expenses. They become part of the property’s cost basis (along with purchase price, legal fees, improvements, etc.) and may affect future gain or loss calculations. 

So for shore area investors, it’s not a current deduction, but it can influence eventual tax when you sell.

What this means for homeowners and sellers in the Wildwoods & Cape May County

When you purchase or sell:  

• Don’t assume commissions are deductible — you won’t get a current year deduction just for paying your realtor.
• But know they matter for the final sale calculations. Commissions may reduce your “amount realized,” which can shrink or eliminate capital gains tax when you sell.
• Track all selling-related costs carefully. Keep records of commissions, legal fees, escrow or title costs, advertising or staging - these all may reduce your taxable gain.
• Consult your tax advisor. Because personal use vs. investment use changes how these costs are treated, and because other rules (like gain exclusion) may apply, professional guidance is recommended. 

Why this matters — especially at the Shore

The Shore market - including the Wildwoods and Cape May County - has unique dynamics: seasonal rentals, vacation homes, second properties, and investors seeking rental income. In that context:

• With commissions often substantial (because of multiple agents, complexity, or higher values), deducting them from sales proceeds can noticeably reduce your tax burden.
• For homeowners who sell as their primary residence, commissions could help in combination with home sale gain exclusions.
• For investors, factoring commissions into cost basis or sale proceeds can be a meaningful strategy when evaluating long-term return on investment.

If you’re buying or selling real estate in the Wildwoods or Cape May County and want to know how commissions may impact your taxes, I’m here as a resource. The The Jessica Lees Team specializes in transactions across the Wildwoods and Cape May County, and we guide clients through both market decisions and smart tax‑aware planning.

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