I purchased a rental property last year. What closing costs can I deduct?
Settlement fees and closing costs for buying the property are part of your basis in the property. These include:
- Abstract fees,
- Charges for installing utility services,
- Legal fees,
- Recording fees,
- Surveys,
- Transfer taxes,
- Title insurance, and
- Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions.
For additional information refer to Publication 527, Residential Rental Property.
References:
I own a duplex. I live on one side and rent out the other. Is my mortgage interest and property taxes fully deductible on Schedule E?
No. Only the mortgage interest and property taxes for the portion you are renting are deductible on Form 1040, SCHEDULE E, Supplemental Income and Loss. If you receive one bill, you should prorate the rental portion based on square footage. Your portion can be deducted on Form 1040, SCHEDULE A, Itemized Deductions, if you can itemize. Refer to Publication 527, Residential Rental Property, for more information and the Instructions for Form 1040, Schedule E, Supplemental Income and Loss.
References:
Can you deduct Private Mortgage Insurance (PMI) premiums on rental property? If so, which line item on Schedule E?
Yes. Deduct it on line 9 of Form 1040, SCHEDULE E, Supplemental Income and Loss. Write "PMI" on the dotted line.
References:
Where on Schedule E do you put costs paid (points, fees, etc.) to refinance a rental property?
Expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses. You can amortize them over the life of the mortgage on line 18 of Form 1040, SCHEDULE E, Supplemental Income and Loss.
References:
I have losses from a passive rental real estate activity in which I actively participate. Can I offset the losses against my nonpassive income?
If your rental of real estate is a passive activity, you may generally offset a loss of up to $25,000 against your nonpassive income if you actively participate in the activity. However, married persons filing separate returns who lived together at any time during the year may not claim this offset. Married persons filing separate returns who lived apart at all times during the year are each allowed a $12,500 maximum offset for passive real estate activities. For additional information on limits on rental losses, refer to Chapter 10 of Publication 17, Your Federal Income Tax, and Tax Topic 425, Passive Activities - Losses and Credits.
References:
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