We can help. There are many pieces of information when property is purchased. The Settlement Statement (HUD or otherwise) is a tool used to help you find what you need to use for your rental. Provided are costs that are currently an expense and costs that must be added to the cost of the property itself.
The following expenses would be added to the cost basis of the rental (purchase price):
- Title fees, transfer fees, legal fees, document recording fees, etc.
- You can enter one figure as your basis for depreciation without enter individual amounts. Add then all together, then enter the total. Keep your statement with your tax files.
The following expenses would be deducted as an expense on your rental activity if the purchase occurred in 2022:
- Prorated mortgage interest (If it is the same bank, it may or may not be included in your 1098), prorated property taxes
- If this is the year of purchase, you would use the property taxes from the Settlement Statement and not the amount you paid later, if applicable. The Settlement Statement prorates the full amount to both the buyer and seller in the year of purchase.
- Do NOT use payments made to escrow. Expenses paid from escrow are deductible, if applicable.
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