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Updated over 6 years ago,
What closing costs, fees, etc. are deductible from 203k project?
I closed on a multi-family 203k project in Chicago that I am house hacking. Since I will be occupying, I understand I can only write off a portion of the expenses (presumably 75% since there are 4 floors and I will live on 1). Some questions:
- My accountant is saying that pretty much all closing costs and rehab expenses except interest and taxes paid will just be captured by standard 30 year depreciation. Is that accurate
- Is upfront mortgage insurance premium something that can be written off or is that also depreciable?
- Would the entire rehab cost be captured in general depreciation of the property or should I parse items out? Like, for instance, kitchen cabinets and bath vanities that probably won't last 30 years.
- I plan to purchase appliances for all the units. Would those be captured in the same rehab depreciation above or would I also separate those?
- Is I sold for a profit and met the threshold for occupying the property for 2 of the past 5 years, do I still get to not pay taxes on those profits or would that be different because it is currently a multi-family and I'm already taking deductions on expenses and depreciation on the units I am not occupying? So, essentially, I don't pay taxes on 25% of the profits since I occupied 25% of the building?
- To piggy back on #5 above, what if the scenario were that I de-converted the property into a beautiful SFH, still met the 2 of 5 year threshold (probably when it was a multi family but maybe not) and sold it for a profit?
Here are some line items that appears on my master statement that I paid for. I am curious to know if any of these are a write off versus depreciable:
- 203 (K) Supplemental Origination
- Application Fees paid outside closing
- Lender Fees
- Processing Fees
- 203 (K) Consultant Fee paid outside closing
- 203 (K) Architectural Fee
- 203 (K) Title Update Fee
- Homeowner's Insurance Premium
- Survey Fee
- Buyers Attorney Fee paid outside of closing
- Title - Escrow Fees, Policy Update Fee, Chain of Title Fee, CPL Fee, Overnight/Express Delivery Service Fee, Email Package Fee, Tax Payment Service Fee, Yadda Yadda Yadda Fee, etc.
- Permits
- Appraisal fee paid outside of closing
- Mortgage Insurance Premium to HUD
The main reason I am asking is because I track all of my expenses including an estimate of what I should be maintaining in reserves for expected income taxes.