As is the case in almost every tax situation, it depends. If we are talking rental property here some costs can be deducted as a current year rental expense like property taxes and prorated interest. Some costs should be amortized over the life of the loan such as points (origination fees, appraisal fees, etc). Some costs should be added to the basis of the property such as survey fees, attorney fees, stamps, etc. I'm sure you can find some good articles online discussing each line item on the HUD statement. Hope this helps.
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
12y
Since no one has replied I will take a shot. Hopefully a CPA here will confirm (or correct) my answer.
It is my understanding that closing costs go into the basis of your property. That means it would not be deductible in the year you buy the property. As part of the basis it would be deductible as depreciation over time.
As is the case in almost every tax situation, it depends. If we are talking rental property here some costs can be deducted as a current year rental expense like property taxes and prorated interest. Some costs should be amortized over the life of the loan such as points (origination fees, appraisal fees, etc). Some costs should be added to the basis of the property such as survey fees, attorney fees, stamps, etc. I'm sure you can find some good articles online discussing each line item on the HUD statement. Hope this helps.
Investor · Rockville, MD · Member since 2012 · 27 posts · 2 votes
12y
Thanks for the replies. The closing costs between the 2 props is close to $18k (out of pocket) so I was hoping to realize that back a little sooner than adding to property basis, but I understand.
Turbotax also asks if you have purchased a house in the last year, but I wasn't sure about the rules for REI. Trying to start tax planning a little early...
Yes, some are; directly deductible and some need to be amortized over the life of the loan. Others will be depreciated along the basis of your mortgage.
First problem is using turbo tax. You get what you put in.