A thought occurred to me. What if when buying as part of the negotiation you offer to pay the seller's closing costs especially real estate commissions for an equivalent reduction in price?
It would not affect how much money the seller puts in their pocket, but it would give you a larger expense to write off and get you some tax savings.
It would reduce your cost basis and lower your yearly depreciation a little, so it mostly moving your tax savings you year #1 rather than spread over 27.5 or 40 years. Considering the time value of money and the fact that you may not fully depreciate anyways, it seems like something that could give you a modest benefit.
Any thoughts? Maybe I am missing something. I don't think I have read or heard about this before although I'm sure its not a new idea.
1) it would be more cash out of pocket
2) the majority of those costs are not expensed, but added to your basis and depreciated.
who said you can expense that cost instead of depreciating it?
@Basit Siddiqi , it is a legal cost. So, I would think it could be an expense. If I am wrong, please explain. This was just a thought and I was hoping for some feedback.
@Wayne Brooks , which ones can be an expense? Paying the seller's share of property taxes? Property transfer tax? Sales commission? Deed prep?
It was only a thought. Just looking for feedback.
I believe that would just be considered a closing cost, and it would be capitalized. It is a good idea, but it depends on your CPA agreeing that it can be expensed. If it cannot be expensed then it is a non-starter.
My opinion as a non-CPA is that it can't be expensed, but you should talk to your CPA if you want to know for sure.