Closing Costs/ Points

[wleighton]

Hello,

I bought a 4-Plex in january 2020. Lived in one unit, rented out the other 3. 

Which closing costs can I deduct as rental expenses on my Schedule E, and which should I be adding to my depreciation cost basis?

I paid $5980 in points on this loan, am I correct that I should amortize (not depreciate) this amount separately, using just the rental portion as the basis ($4859), over the next 30 years? I moved out of the 4-plex in October, and began renting out all 4 units, so can I use the $4859 as the basis for this asset in 2020, and then the full $5890 in 2021, or am I missing a step? 

Thanks in advance.

[AmyC]

Yes but not the way I think you are thinking. The closing costs are added to the basis and depreciated as part of the unit's price. So the first 3 begin depreciation in 2020 for 27.5 years while your unit begins in 2021 for 27.5 years.

You have a 4 plex. Are you counting this as a 3 unit item A for 2020 and then your unit as item B in 2021? Or are you counting each unit on its own? If you decide to sell one unit, it is easier when they are separated. If you will only sell as a group, then just the two rental parts. It is not and can't be one unit.

This article, Topic No. 414 Rental Income and Expenses, has lots of great links and information to help you along your rental journey.