tax write offs

[Kevin Macdonald]

Newbee investor, I purchased my first investment property the first week of January this year. The property was a house which was never completed. I should have the house completed in approximately 4 months. My plan is to have this house for many years (probably 20).

I understand that money I put in the house (materials, labor, etc...) are deducted by depreciation over time, but I was curious how about items that pertain to fees for permits, septic/well work done, yearly insurance/taxes, etc....

This year this is what I have put into this property and I have had zero rental income because the property is not rented yet:

fees that are not improvements to house

1. 12k in loan fees on the mortgage
2. $3200 in property taxes
3. $2000 community road fee (they happen to redo the roads the year I buy this house).
4. Approximately $2k dollars in fees to get permits
5. $1600 insurance on property/structure

Fees to land not house
1. new septic, drain field, well $22k

fees to improve property by the end of this year will total approximately between 30 to 40k dollars.

Just want some ideas of tax stratagies, is it best to get a real estate CPA or could I use tax software to figure out what can and cant be written off.

Any help will be appreciated

[Bill Walston]

Originally posted by Jacob Allen:

Hey @Kevin Macdonald
The loan fees can be amortized over the life of the loan. The costs associated with the well/septic system are items known as land improvements and can be depreciated over 15 years. Basically anything that improves the value of the land or house can and should be depreciated as a general guideline with a few exceptions as always. The remaining costs that you have listed should all be expensed in the year incurred. Hope this helps.

I would agree Jacob, IF the property was completed and in service. However, the OP said that the property will not be ready to rent for another four months. Accordingly, these expenses will need to be capitalized and added to the cost basis of the property.