Question

Depreciating rental property combining house + startup costs into one Basis number

Forum|Forum|2 years ago
December 1, 2023
1 reply
0 views

Just bought a rental property and put it into service a few weeks after. I want to combine the building basis (Total value minus land portion) + closing costs + appraisal + inspection + other startup costs into a Single Basis number. Turbo tax walks the user through the building basis + most closing cost items, but not all. Do I need to capitalize the other expenses as "Other depreciation"? Or should I disregard Turbo Tax's canned building entry fields and but enter the unified Building+closing+startups number as "Other depreciation"?

TurboTax Home & Biz Windows

O

Opus 17

Employee

Remember that not all closing costs are allowable as adjustment to basis.

See publication 523 and 551,

https://www.irs.gov/pub/irs-pdf/p523.pdf

https://www.irs.gov/taxtopics/tc703

(You generally can't include an appraisal, for example.)

Turbotax does the walk-through because not everyone knows that some closing costs are allowable. You only have one basis, so if you are confident you can calculate it correctly (and you keep a record for as long as you own the home plus 3 years after you sell), you don't need to follow the walk-through, you can enter the basis as a single number.