Turbotax: City Transfer Tax when depreciation

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Turbotax: City Transfer Tax when depreciation

Zhenyang Jin
Member since 2018 · 70 posts · 24 votes

Hi Real Estate Veteran,

I am using turbotax to calculate depreciable basis for my rental property. After evaluating my situation, I need to add the cost of City Transfer Tax into depreciable basis. However, I don't know how to group the cost into following group? I wonder whether anyone knows the answer. If possible, I wonder whether can share me some materials or link about Amortization Code Sections.

Appreciate your help!

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    4y

    Transfer taxes / stamp taxes are normally added to the cost basis of building / land.

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  • Zhenyang Jin
    OP
    Member since 2018 · 70 posts · 24 votes
    4y

    Basit, thank you for your reply.

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  • Jeff O.
    NJ · Member since 2016 · 7 posts · 4 votes
    4y

    Hello @Basit Siddiqi, thanks for sharing your insight.  I have do have a related question as it relates to deductions that can be capitalized as part of the cost basis (depreciated for 27.5 years) vs amortized through the life of the loan (for example 30 years).

    1) Home inspection fee.  This was conducted to acquire the rental property - I assume this can be capitalized - added as part of the cost basis and depreciated for 27.5 years.

    2) Lender's title insurance.  Should this be capitalized as part of the cost basis?  Technically, this is part of the lending process so one would think it should be amortized.  I was looking at the IRS publication 527 and it's saying you can capitalize title insurance. But it does not go into specific whether it's referring to an owner's or lender's title insurance.  So I assumed the lender's title insurance can be capitalized as part of the cost basis and depreciated for 27.5 years.

    3) Prepaid Home Insurance.  I pre-paid 1 year's worth of home insurance as part of the closing cost even though I closed on the property in Jun 2021 (policy coverage runs from Jun 2021 to May 2022).  I assume the entire amount can be expensed for 2021 since it is within the 12-month rule for pre-paid expenses.

    Appreciate your thoughts.

    Thanks!

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