Deduction related with the purchase of a property

[Jose Leandro Gobea]

Hello guys, I have a question. When I buy a property  how much can I deduct in average from that purchase for that year or what thing related to that purchase can be deducted.. ( example: the down payment?) Also, can I use the deductions from real estate to reduce my active income and income from the stock market?  Thank you so much in advance and I know this is a general question is not base in any real example so I understand that the answer can be different for each property and situation.

[Greg Scott]

Please seek guidance on your first property.  Expenses and taxes can be a confusing part of real estate.  Here are some examples below.

A down payment is not an expense so cannot be deducted.  Even though cash is coming out of your pocket, you are essentially exchanging your cash for a hard asset (the property).

Some cash expenses can be deducted.  For example if you paid someone to mow the lawn at your rent property, that is an expense that can be deducted.

Some cash expenses cannot be deducted immediately and must be expensed over time. For example, the costs to obtain the mortgage are typically amortized over the life of the loan.

Real estate also offers expenses that do not involve cash coming out of your pocket.  For example, depreciation is a non-cash expense.  If you do it correctly, there are also ways to pull-forward depreciation expenses.

Whether or not all these expenses will be useful to you is based on your personal tax situation which is why you want to have a good CPA.

[Basit Siddiqi]

You can not deduct the down payment

You can deduct any costs you incur to upkeep the property(Repairs, insurance, taxes, depreciaiton, etc)

Whether you can offset the rental loss against other forms of income depends on whether the property is considered active or what your income level is.

[Jose Leandro Gobea]

Quote from @Greg Scott:

Please seek guidance on your first property.  Expenses and taxes can be a confusing part of real estate.  Here are some examples below.

A down payment is not an expense so cannot be deducted.  Even though cash is coming out of your pocket, you are essentially exchanging your cash for a hard asset (the property).

Some cash expenses can be deducted.  For example if you paid someone to mow the lawn at your rent property, that is an expense that can be deducted.

Some cash expenses cannot be deducted immediately and must be expensed over time. For example, the costs to obtain the mortgage are typically amortized over the life of the loan.

Real estate also offers expenses that do not involve cash coming out of your pocket.  For example, depreciation is a non-cash expense.  If you do it correctly, there are also ways to pull-forward depreciation expenses.

Whether or not all these expenses will be useful to you is based on your personal tax situation which is why you want to have a good CPA.

 Thank you so much Greg

[Jose Leandro Gobea]

Quote from @Basit Siddiqi:

You can not deduct the down payment

You can deduct any costs you incur to upkeep the property(Repairs, insurance, taxes, depreciaiton, etc)

Whether you can offset the rental loss against other forms of income depends on whether the property is considered active or what your income level is.

 Thank you for your response, I appreciate it.