Closing Costs, Property Depreciation | Maximize Real Estate Tax Deductions
You can maximize your property basis by accounting for closing costs, which will save you more money because you get to deduct more than you already do (assuming you don’t already account for closing costs).
By increasing your depreciable basis, you enable yourself to take larger depreciation deductions, which results in a lower taxable liability (the taxes you owe).
To optimize your property basis, find the Contract Sales Price, which is on Line 101 of your Settlement Statement. You can add items unpaid by the seller (Lines 210-212) but be sure to subtract items paid by the seller in advance (Lines 106-108).
Next you must add Title Charges (Lines 1100-1110), Recording and Transfer Charges (Lines 1200-1205) and Additional Settlement Costs (Lines 1300-1302).
This gives you the maximum depreciable basis for your property. Divide this number by 27.5 (for residential property), and this gives you your yearly depreciation deduction.
|
Welcome back! What did you think of our Property Management Software?
Are you subscribed to our feed and receiving email updates? |
You might also want to read:
- Tax Depreciation Tax Depreciation Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the rental real estate property. Most types of tangible property (except, land), such as buildings, machinery, vehicles, furniture, and equipment are [...]......
- New RESPA Rules Enable Shopping for Closing Services Changes in the Real Estate Settlement Procedures Act (RESPA) that took effect on January 1, 2010 require lenders to fully disclose all closing costs – including the costs of obtaining a loan and estimated costs for title insurance, settlement and other services – within three days after a buyer applies for a mortgage. Now homebuyers will [...]......
- Capital Gains 1031 Exchange Tax Planning – Calculate Capital Gains, Minimize Taxable Boot! You can minimize gain and lower tax burdens by accounting for sale expenses and exchange fees. By minimizing cash received and maximizing cash spent, you can minimize your deferred gain so you can owe less in taxes. To minimize cash received on your sold property, you should deduct all closing costs and commissions paid. Take the [...]......
- Sold Investment Property | Minimize Capital Gains Tax, Deduct Closing Costs You can minimize the taxable gain from the sale of a property by accounting for your sale expenses, like closing costs. Closing costs that you need to consider can be found on the property’s settlement statement. To minimize your taxable gain from the sale, first locate the Contract Sales Price (Line 401) on the settlement statement. [...]......
- Loan Amortization, Loan Costs | Tax Deductions You should deduct all of your loan costs to maximize your tax savings. Unlike title charges, loan costs do not add value to your property, and therefore must be must be amortized over the life of your loan (and not depreciated with the property basis.) To find out your yearly amortization deduction, add all the loan costs [...]......
