Paid cash as part of closing cost on a rental home. Can that be expensed?

[Somebody42]

I paid cash to buy a home that became a rental property; some of it obtained from mortgaging my own house, and some from cash on hand.

Can the cash on hand be considered a home rental expense?  (Expenses you paid for the seller?)

[ColeenD3 · Accepted solution]

No. It is not an expense. Your cost, no matter how you pay it, is just the cost. Your rental home will be depreciated over 27.5 years.

Note: If your rental property is located out-of-state, make sure you first set up that state properly in Personal Info. That way, when you do your state taxes, we'll be ready to go.

To enter your rental:

1. In TurboTax, search for rentals and select the Jump to link at the top of the search results.
2. Answer Yes to the question Did you have any rental or royalty income and expenses in 2020 for property you own?
3. Follow the on-screen instructions as you proceed through the rental and royalties section.
   • We'll ask you to enter general information about your rental (like description, address, and ownership percentage).
   • Eventually, you'll come to the Rental Summary screen, which is where you enter your rental income and expenses, assets and depreciation, and vehicle expenses.

Tip: Rent is considered income in the year you received it, not the year it applies to. This means that a rent payment for the month of January 2021 collected in December 2020 is reported on your 2020 return.

If you're also filing a nonresident state return to report income from an out-of-state rental property, be sure to complete your nonresident state return before you prepare your resident state return when you get to the State Taxes section.