Appraisal Fee Deduction

[Kyle Meyers]

I am getting a cash out refinance mortgage on one of my rentals and will be using the cash to rehab another property to rent out. As I understand it, the appraisal fee and some other closing costs are not immediately deductible. Are they amortized over the course of the loan or do they get added to the property basis? Also, should I deduct them on the schedule E for the property with the mortgage or the one I will be renovating with the funds?

[Account Closed]

Originally posted by Kyle Meyers:

As I understand it, the appraisal fee and some other closing costs are not immediately deductible. Are they amortized over the course of the loan or do they get added to the property basis? Also, should I deduct them on the schedule E for the property with the mortgage or the one I will be renovating with the funds?

This is true. A few of the costs may be deductible in the year of purchase, but most can not be.

When you look at the HUD-1 you will find several categories of expenses listed in the settlement charges.

In the section "Items payable in connection with the loan" you will points (loan origination fees) and other loan fees. Loan fees and points must be amortized over the life of the loan in the case of investment property.

There are items such as interest, property insurance, property taxes that could be able to be expensed immediately.

You will also find charges related to title, recording fees, assessments, transfer fees, surveys, etc that are suppose to be added into the basis of the property.