All Forum Posts by: Jack Forester

I'm talking about amortization and depreciation on Schedule E tax forms.  I guess I should have put that in the original post. Perhaps it wasn't as obvious as it sounded inside my head. 😉

Ok, so pick which one pays back faster. If I reduce origination fees by $2600 on a 3 yr mortgage, then the title insurance charges are not reduced, and they are depreciated over 27.5 years.   

If I apply the $2600 towards title insurance , then I can amortize the origination fees over the 3 yr loan life and get much larger deductions up front. 

No all closing costs are treated equally . 

Make sense? 

Okay, @Account Closed, based on what you are saying, it would go towards closing costs which are normally amortized over the life of the loan (Loan Origination Fee, Loan Discount, Appraisal Fee, Credit Report, and other origination charges), rather than the depreciated line items (Title Charges, Recording Fees, Survey, Pest Inspection).  Right?  If I applied it to things like Title Charges, I'd effectively be decreasing the cost/basis of the property, right?

No, just $2600. Makes sense, just reduce the purchase price.

In the past on HUD statement, the seller credit was applied directly to specific closing items. Since those items were not paid out, they weren't added to the cost basis to be depreciated (or if they were costs of the loan, such as origination charges, amortization ) .

I assume now, it just comes off of your cost basis,  effectively a decrease in sales price. 

Being that this is a Tax forum, I assume some CPAs might be subscribed to this forum. 

 Okay, this is what my best guess was on how to do this. Use the latest tax assessors values, then determine the land percentage of the total and adjust for the new price.   The other way I thought of was to use the newly performed appraisal, which as a "Cost Approach", which breaks down the land cost vs structures, then using that ratio, but the land value seems a bit more arbitrary in that section, so I figured the tax assessed value (being performed by the government) gets more weight.

Example:  Tax Assessment shows Total value of $100k:  

• Land $20k
• Structures at $80k

This makes the structure to total value at $80k/$100k or 80% of the total.  

If the new purchase price is $80k (congratulations, btw), then the new basis for depreciation is $80k times 80%, or $64k.

Okay, I bought a new rental property and had the seller pay 2% of closing costs (max allowed by my lender). Under the new Closing Disclosure form (no longer the HUD form), it shows nothing specifically paid by the seller, it only shows up in the "Calculating Cash to Close" and "Summaries of Transactions" as the "Seller Credits".

So, for the purposes of calculating the items for "Amortization over the life of the loan" (30 yrs) vs "Depreciation over life of the structure" (27.5 yrs), where do I deduct the Seller Credits?  Do I get to pick?  Does it just reduce the overall cost of the property (thus only a portion gets depreciated, as a portion would go towards the land)?

Maybe they were going for something more like this: http://www.littlethings.com/lauri-mosaic-house

What repairs are required? 

I looked briefly, forgive me if there is a thread on this, but I've been burning through the BP podcasts on my 1 hr commute to and from work.  Just finished episode 57 about short term rentals in Panama. I find it keeps me focused, if I can avoid the "shiny balls"... What episode was that quote from? 

What is your favorite episode and why?