Tax Deductions
Hello everyone, I was wondering if any acquisition costs or closing costs are deductible for investment properties. Such as inspections, and appraisals. 2nd question, I purchased my second investment property in december, i never made any money from it but spent lots renovating in 2004, is this deductible. Thanks ahead of time for all your help.
NEWKID!!!!!
For the last two years, my tax preparer (Jackson Hewitt) has told me that HOA fees are not deductable!!!!
For a condo, that is a signicant amount of money. Can you point me to the IRS Pub so I may go get my last two years corrected?
Thank you,
Marc
Quote:NEWKID!!!!!
For the last two years, my tax preparer (Jackson Hewitt) has told me that HOA fees are not deductable!!!!Marc,
If you are referring to your primary residence or second home, your tax preparer is correct. On the other hand, if you are talking about a rental property, then condominium association fees to maintain the common elements are deductible on Schedule E. IRS Pub 527 has all the info condos and cooperatives. Refer to page four, beginning with the paragraph titled "Condominium".
Even though HOA fees are not specifically mentioned as deductible rental expenses, they are not excluded either. I take the position that, by extension, HOA fees for a rental townhouse or detached rental dwelling are also expensed on Schedule E because the property is part of a Planned Unit Development and the homeowners association fees are assessed for maintenance of the community common elements just as it would be within a condominium association.
Might be time to look for a new CPA. Both quotes below are from IRS publ 527.
"You should claim the correct amount of depreciation each tax year. Even if you did not claim depreciation that you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted." Which means you are paying taxes on gain for which you never received a tax deduction.
"Section 179 deduction. You cannot claim the section 179 deduction for property held to produce rental income. See chapter 2 of Publication 946."
The reason 179 deductions are mentioned in the Sch E instructions is because Sch E is also used for royalty income which could have a 179 expenses. Publ 527 also lists carpeting as an improvement which is depreciated over 5 yrs.