Can certain expense be deducted from a home purchase to establish a higher basis when it is then sold

Forum|Forum|3 years ago
March 23, 2023
1 reply
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We purchased a nearby home in November 2019 to demolish and replace with a new construction home. Due to construction price increases we opted to sell that home in March 2023 instead of proceeding with demolition. Questions:

* Can we deduct depreciation on the home, even if it was never rented it

* Can we deduct property taxes paid on the home while it was vacant

* Can we deduct costs related to studies and plans for the new home that was never constructed (a non-trivial amount)

PatriciaV

Employee

Since you purchased the property but never offered it for rent, this would be considered a second home (even if you never lived there).

1. No, you cannot take depreciation on a second home or an investment property.

2. Yes, you can report property taxes on a second home under the Your Home topic in TurboTax.

3. No, the plans related to a failed "investment." If you had built the new residence, those costs would have become part of the property basis as a rental or when the residence was sold.

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