Lumping Closing Costs???

2 Replies

Howdy friends!  in 2008 I purchased my first three properties -- boo yah!

For accounting, I have quickbooks self-employed (I was already using this for my FT freelance biz).    

I am trying to be very on top of my transactions for tax time, and wondered if lumping all "closing costs" for each transaction is sufficient for tax purposes, or if I need to separate each transaction (appraisal fee, credit report fee, third party processing, lawyer fees, survey fee, title search, title endorsements, Lender's title insurance, settlement fee, tax certificate, recording fees, transfer taxes...... etc, etc, etc... You get the picture).

For my most recent purchase these are about $5800.  Is there a reason I should list each item separately, or can I just enter "closing costs" into quickbooks?


Connor :)

@Connor Heim

Congratulations on the home purchases....from a decade ago!
I assume you meant 2018.

Closing costs on a closing disclosure can be one of the following for tax purposes
1) Added to basis and depreciated over useful life
2) Currently expensed

Currently expensed is a better benefit than added to basis.

Items such as pro-rated real estate taxes, mortgage interest, HOA monthly dues/fees can be currently expensed.

I think it is fair to lump the other closing costs not currently expensed.

@Connor Heim

Actually, there is a 3rd group, too: loan costs which are not depreciated but amortized - sounds similar but is treated differently for taxes (deducted ratably over the life of the loan).

So, some items are deducted right away, and other items are placed into two more buckets for deducting slowly. Yes, it should be simpler, but it is not.

At least for the first time, I recommend you get professional advice on which is which.