Q: We sold a residential rental property last year at a substantial gain. I know we can deduct the property taxes. Can we also deduct the selling fees and closing costs? L.C., Ormond Beach, Fla.
A: No. Your selling costs are not deductible in the same manner as mortgage interest expenses and property taxes. But that's not the end of the story. These selling expenses reduce the capital gain from your property sale. For example, let's say the gain was $300,000 and you incurred $25,000 in selling fees. In that case, your capital gain is reduced to $275,000 ($300,000 minus $25,000). At the current 15 percent rate, that would save you $3,750 in tax (15 percent of $25,000). Qualified selling expenses include closing fees, title searches, attorney's fees and recording costs. For details, see IRS Publication 551, Basis of Assets, at www.irs.gov/pub/irs-pdf/p551.pdf.