Bought rental home in another state and unsure what forms to use, what materials are deductable.

[LPW425]

I bought my first rental home last year in another state (Louisiana). And doing taxes is confusing at best. I've read here a bit about what is and is not deductible (paint), but want to double check. Everything was done before renting. I figure I CAN deduct the new fence and new flooring, but NOT the new toilets, paint  or screens.  And I assume I can deduct closing costs and insurance. But what about other costs associated with the purchase, such as inspections and utility deposits? Also, do I just need to complete a Schedule E? What about the f1040se? It was a cash sale, so the purchase was otherwise unremarkable. Would the Turbotax Basic be sufficient? Thanks!

[DianeW777]

Yes, TurboTax will be more than sufficient to handle your rental property. It will be reported on Schedule E.

The fence would be an asset and not part of the structure so it would be listed separately. Utility deposits would not be a deduction because it is exactly that, a deposit that will likely be returned to you. If at some point it is not returned, you can deduct it when you no longer have a right to it, if that should occur. Painting and other repairs that do not add to or extend the life of the property would be expenses.

• Where do I enter income and expenses from a rental property?

The following items should be added to the cost basis of the rental home. Enter the full cost of the property and then enter only the land cost when asked. This can be calculated using the tax assessment from the city or county. 

• New flooring
• New toilets
• Closing Costs - See Below

Government Recording and Transfer Charges 

• Recording fees
• Title Charges
• Lenders Title Policy
• Settlement or Closing Fee (includes inspection)
• Municipal Lean Certificate
• Title Exam
• Owners Title Insurance

You can include these closing costs and add them to the cost basis of the property as noted above.

Loan charges - Loan charges are part of the loan, not cost basis

• Application fees
• Lender fees
• Appraisal Fee
• Inspection Fee
• Condo Questionnaire
• Credit Report
• Debt Report

You can't include in your basis the fees and costs for getting a loan on property.

Lastly, for the fence, and any other assets besides the home itself you may consider the DeMinimis Safe Harbor (DMHS) election to take the expense in full.

• What can I depreciate or expense with the business safe harbor method?