Florida Real Estate Q&A Discussion Forum

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Marquest Page
  • Investor
  • Pittsburgh, PA
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Claim Depreciation on "Subject to" Property

Marquest Page
  • Investor
  • Pittsburgh, PA
Posted Jan 28 2022, 09:53

Hi BP! I am in need of any advise that anyone can provide. I understand most are not attorney's or tax professionals so I will not hold anyone too whatever they share as if that were the case. I purchased a property subject to the existing mortgage in late 2021. If I am able to claim depreciation for this property, do I claim that I purchased the property with the cash that I brought to closing for the seller or do I claim that along with the then loan balance once I had assumed the mortgage? Any advice, whether it be legal or personal experience, would be greatly appreciated. 

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Joe Splitrock
  • Rental Property Investor
  • Sioux Falls, SD
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Joe Splitrock
  • Rental Property Investor
  • Sioux Falls, SD
ModeratorReplied Jan 28 2022, 10:21

@Marquest Page depreciation is based on purchase price. That would be cash plus remaining loan balance. I assume your purchase contract and title work would have the total dollar amount on it. I doubt you actually assumed the mortgage, because that would mean it transferred to your name. You are probably just paying the mortgage and it remains in the sellers name. You will have to be careful on the interest. Normally you would get an interest paid statement at tax time, called Form 1098. I am assuming you want to claim interest expense, so make sure you have mortgage statements and checking account or cancelled check. You will want to keep both the statement and proof showing funds were paid by you. 

Was the property rented in 2021, because if it was not in service as a rental, you will not state claiming expenses until 2022. You can't claim expenses without rental income.

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Marquest Page
  • Investor
  • Pittsburgh, PA
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Marquest Page
  • Investor
  • Pittsburgh, PA
Replied Feb 23 2022, 10:03

@Joe Splitrock      

 Thank you for the response. I do apologize for the length of time to reply to your post. Yes you're correct in your presumption of me keeping the mortgage in the seller's name and yes you are also correct essentially on everything else that you mentioned. I didn't find a tenant until the end of 2021 and they moved in this year. 

I was under the impression that as long as I had proof that I was advertising the property and that it was available for rent that I would be able to still claim expenses. If what you're saying is correct, I greatly appreciate your input and will reconfirm. Sincerely, thank you for your reply. :-)