I have been paying $450 each year as the "Front Foot Benefit Charge" to the water company,
That's a simple rental expense that would be reported as a "utilities" cost. You can only claim it in the tax year you actually paid it. You can't add it to your cost basis in any way, shape, form or fashion because weather you paid it or not makes absolutely no difference in the value of the property. You also can't claim prior years paid all in one single tax year.
You'd have to amend your prior year's returns to claim what you paid each year. But you can only amend the current tax fileing year (2019 as of now) and three years back. Amending more than 3 years back for this will make no difference to your tax liability in your favor.
If amending more than three years back results in you owing the IRS more taxes, then you are required to pay it. But if amending more than 3 years back will result in additional refund for you, then you will *NOT* receive it. The IRS has a 3 year statute of limitations on refunds.
If you paid the 2019 bill in 2019, then you can claim that as a rental expense on your 2019 return. But you can't claim any expenses paid in any other year on your 2019 return.
Personally, since long term residential rental property most commonly operates at a loss "on paper" at tax filing time, I wouldn't bother with amending. Since you can only amend back to 2016 (and amending for the 2019 tax year expires on July 15, 2020) it's way to much of a PITA for the piddly amount of money involved.
Remember, an amended return can not be e-filed. The IRS says so. You have to print, sign and mail it to the IRS.
Additionally, after amending yor 2016 tax return, when you go to amend the 2017 tax return you flat out can not import your changes from the carry over loss that changed on the 2016 return. You'll have to correct the carry over loss manually on the 2017 return. Same would hold true for the 2018 return.
Now you could import from your amended 2018 return *IF* you haven't started your 2019 return yet. But that too can pose it's own separate PITA.
If you completed one or more of the prior year's returns using the online version, amending it is a real PITA because you have to obtain and install the CD version of the program for that specific year. Then after installing it on your computer you have to download the .tax20nn data file to your computer and then use the CD version to open and amend it. It's a real pain. For less than a $500 per year expense that's less than $1500 for 2016-2018 and it "might" make a grand total $10 difference in your final tax liability on any gains realized from the sale. Just not worth the effort that risks human error on your part resulting in back taxes, fines, penalties and late fees later down the road. You can double that cost if your state taxes personal income too.
Overall, I suggest you leave well enough alone and simple claim the amount you paid in 2019, on the 2019 tax return and just press on with life.
Things like this I like to refer to as a "stupid tax". We all pay our share of stupid tax, and usually more than once. I've paid my share, and have no doubt I will pay more stupid tax in the future. But so long as we don't pay it for the same thing twice, it's a learning experience. So for you, since the amount involved for each tax year is so minuscule in comparison to the overall bigger picture, you may just want to leave it as a lesson learned in the school of hard knocks, and press on.
