Deduction From A Hud 1

[mariaefletes]

For a rental property, what items from the settlement statement (purchase of home) can be deducted on sch. E? Are HOA fees deductible on a rental property?

[Koss]

Rental Expenses

Yes, HOA fees are a deductible expense for a rental property.

Most items on the closing statement are not deductible. They are expenses associated with the process of buying the property, and they get added to the basis.

Items that are deductible include prorated mortgage interest, property taxes, property insurance premiums, and utility bills.

In other words, if the item on the closing statement is a recurring expense that would normally be paid quarterly, monthly or annually, then it is deductible in the same way as if it had been paid quarterly, monthly or annually. The only reason it appears on the closing statement is because it has been prorated.

If it is a one-time expense associated with buying the property, such as title insurance, or an appraisal, or a county transfer tax, then it gets added to the basis of the property.

BMK

[S T]

See TTB 6-2 - has a Great Chart that matches to the HUD-1

Sandy

[Gary2]

In other words, if the item on the closing statement is a recurring expense that would normally be paid quarterly, monthly or annually, then it is deductible in the same way as if it had been paid quarterly, monthly or annually. The only reason it appears on the closing statement is because it has been prorated.

With the caveat that this doesn't apply to amounts owed by the seller. If the buy pays off the seller's delinquent property taxes, that's basis, not current deduction.

[Koss]

Delinquent Prop Tax

Gary2 wrote:

With the caveat that this doesn't apply to amounts owed by the seller. If the buyer pays off the seller's delinquent property taxes, that's basis, not current deduction.

Well, yeah. But wouldn't that be a one-time expense associated with buying the property, like I said in my post?

I certainly wouldn't expect to pay off the seller's delinquent property taxes on a recurring basis...

BMK