Confused with the "Enter Escrow Fees" for my rental property. Can someone help link the items on that page with exact HUD-1 line number instead of block number? Thanks.

[view2 · Accepted solution]

The only deductible closing costs are those for interest, and deductible real estate taxes. Other settlement fees and closing costs for buying the property become additions to your basis in the property.

These basis adjustments include:

    * Abstract fees,

    * Charges for installing utility services,

    * Legal fees,

    * Recording fees,

    * Surveys,

    * Transfer taxes,

    * Title insurance, and

    * Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions.

    * Those costs that are basis adjustments can be part of your yearly depreciation deduction for the rental property.

You do not include amounts placed in escrow for the future payment of items such as taxes and insurance.

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/ramh/res/sc3secta

[rynlee]

You say that you can't include in your basis amounts placed in escrow for the future payment of items such as taxes and insurance.  But can these items be deducted as expenses?

[Critter-3]

YES ... when the actual bills are paid then they are a deduction on the Sch E.