Tax deductions/expenses for 2nd home closing costs for a vacation rental?

[Anonymous]

We bought a second home last Jan and with changing WFH needs, we ended up just renting the home out vs for personal use in 2022. It's tax time, and I think I have accounted for general rental expenses, however, can any of my home purchase/closing costs be added as an additional rental expense? It would net over to be carry over losses for future years, but just wondering if we can even account for it, or only rental repair/maintenance/improvements can be counted as expenses. I normally do all our taxes, but this is a new situation I haven't had to deal with before. Any advice would be appreciated!

[Anonymous]

Generally not, they are added to your cost basis when you go to sell.

https://www.irs.gov/faqs/sale-or-trade-of-business-depreciation-rentals/rental-expenses/rental-expenses

[Anonymous]

OP, you can depreciate the basis of the property, including some of those closing costs.

And don't forget to deduct mortgage interest!

[Anonymous]

Anonymous wrote:OP, you can depreciate the basis of the property, including some of those closing costs.

And don't forget to deduct mortgage interest!

You can amortize the closing costs if you bought it as a rental. It is very unlikely this could come back to burn you, but you are in default of your mortgage and it appears likely that you committed mortgage fraud by not actually using this as a second home. Personally, I would not amortize the closing costs because of this. It gives credence that you didn’t have the mens rea of intent when you signed the loan papers.

[Anonymous]

Is it Airbnb or long term rent. If the first you can deduct loses on schedule c, if the later you use schedule e which is very restrictive on losses until you sell

[Anonymous]

Thanks all. We've only ended up renting it out a few months out of the past year. Rest of the time it was spent on repairs vs actually using it as a vacation home is what I meant.

I think I'll skip amortizing any closing costs and just deduct the expenses in repairs + mortgage interest and depreciate the large ticket items like roof replacement.

[Anonymous]

Schedule E

[Anonymous]

Anonymous wrote:OP, you can depreciate the basis of the property, including some of those closing costs.

And don't forget to deduct mortgage interest!

You have to depreciate it if it’s a rental.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, you can depreciate the basis of the property, including some of those closing costs.

And don't forget to deduct mortgage interest!

You can amortize the closing costs if you bought it as a rental. It is very unlikely this could come back to burn you, but you are in default of your mortgage and it appears likely that you committed mortgage fraud by not actually using this as a second home. Personally, I would not amortize the closing costs because of this. It gives credence that you didn’t have the mens rea of intent when you signed the loan papers.

It's not fraud if you intent when closing was to rent it out stfu

I didn’t say it was fraud. I said it was likely fraud and definitely a default of her mortgage.

[Anonymous]

Anonymous wrote:Thanks all. We've only ended up renting it out a few months out of the past year. Rest of the time it was spent on repairs vs actually using it as a vacation home is what I meant.

I think I'll skip amortizing any closing costs and just deduct the expenses in repairs + mortgage interest and depreciate the large ticket items like roof replacement.

You can only deduct expenses to the extent you had rental income so the best you’ll do is a net zero unless you are in the real estate business or poor.

[Anonymous]

And you will owe depreciation recapture tax when you sell someday.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Thanks all. We've only ended up renting it out a few months out of the past year. Rest of the time it was spent on repairs vs actually using it as a vacation home is what I meant.

I think I'll skip amortizing any closing costs and just deduct the expenses in repairs + mortgage interest and depreciate the large ticket items like roof replacement.

You can only deduct expenses to the extent you had rental income so the best you’ll do is a net zero unless you are in the real estate business or poor.

Humm...I thought I am allowed to carry over expense loses for following years as long as I am renting parts of the yaear? I currently have the place rented for another 3 months till spring and plan to rent out at least 6 months per year if we can make it work.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Thanks all. We've only ended up renting it out a few months out of the past year. Rest of the time it was spent on repairs vs actually using it as a vacation home is what I meant.

I think I'll skip amortizing any closing costs and just deduct the expenses in repairs + mortgage interest and depreciate the large ticket items like roof replacement.

You can only deduct expenses to the extent you had rental income so the best you’ll do is a net zero unless you are in the real estate business or poor.

Humm...I thought I am allowed to carry over expense loses for following years as long as I am renting parts of the yaear? I currently have the place rented for another 3 months till spring and plan to rent out at least 6 months per year if we can make it work.

You can carry over losses, but at some point you need to make a profit (or have a relatively low income) to be able to actually write them off.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Thanks all. We've only ended up renting it out a few months out of the past year. Rest of the time it was spent on repairs vs actually using it as a vacation home is what I meant.

I think I'll skip amortizing any closing costs and just deduct the expenses in repairs + mortgage interest and depreciate the large ticket items like roof replacement.

You can only deduct expenses to the extent you had rental income so the best you’ll do is a net zero unless you are in the real estate business or poor.

Humm...I thought I am allowed to carry over expense loses for following years as long as I am renting parts of the yaear? I currently have the place rented for another 3 months till spring and plan to rent out at least 6 months per year if we can make it work.

You can carry over losses, but at some point you need to make a profit (or have a relatively low income) to be able to actually write them off.

You can’t write off losses until you sell. They carry forward until then, and at that point they will go against ordinary income.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Thanks all. We've only ended up renting it out a few months out of the past year. Rest of the time it was spent on repairs vs actually using it as a vacation home is what I meant.

I think I'll skip amortizing any closing costs and just deduct the expenses in repairs + mortgage interest and depreciate the large ticket items like roof replacement.

You can only deduct expenses to the extent you had rental income so the best you’ll do is a net zero unless you are in the real estate business or poor.

Humm...I thought I am allowed to carry over expense loses for following years as long as I am renting parts of the yaear? I currently have the place rented for another 3 months till spring and plan to rent out at least 6 months per year if we can make it work.

You can carry over losses, but at some point you need to make a profit (or have a relatively low income) to be able to actually write them off.

You can’t write off losses until you sell. They carry forward until then, and at that point they will go against ordinary income.

If at some point you make a profit on rental income, you can deduct carryover losses on line 22 of Schedule E.