Sale or Trade of Business, Depreciation, Rentals:
Rental Expenses v Passive Activity Losses (PALs)
This is archived information that pertains only to the 2005 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
I purchased a rental property last year. What closing costs can
I deduct?
The only deductible closing costs are those for interest, and deductible
real estate taxes. Other settlement fees and closing costs for buying the
property become additions to your basis in the property. These basis adjustments
include:
- Abstract fees,
- Charges for installing utility services,
- Legal fees,
- Recording fees,
- Surveys,
- Transfer taxes,
- Title insurance, and
- Any amounts the seller owes that you agree to pay, such as back taxes
or interest, recording or mortgage fees, charges for improvements or repairs,
and sales commissions.
- Fees related to obtaining a loan are capital expenses and should be amortized
over the life of the loan.
For additional information, refer to Publication 527, Residential
Rental Property, Publication 17, Your Individual Income Tax Guide,
and Publication 535, Business Expenses.
Can you deduct Private Mortgage Insurance (PMI) premiums on rental
property? If so, which line item on Schedule E?
Yes. You can deduct Private Mortgage Insurance premium on line 9 of Form 1040, Schedule E (PDF), Supplemental Income and
Loss. Write "PMI" on the dotted line.
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