I entered a rental property purchase agreement in 2020, paid appraisal fee in 2020 and the property was closed in 2021. How am I going to claim the appraisal fee?

[DawnC]

The appraisal fee you paid becomes part of the basis in your rental property.  

Generally, deductible closing costs are those for interest, certain mortgage points and deductible real estate taxes.

Many other settlement fees and closing costs for buying the property become additions to your basis in the property and part of your depreciation deduction, including:

• Abstract fees
• Charges for installing utility services
• Legal fees
• Recording fees
• Surveys
• Transfer taxes
• Title insurance
• Any amounts the seller owes that you agree to pay (such as back taxes or interest, recording or mortgage fees, sales commissions and charges for improvements or repairs).

[superbean2008]

Thanks DawnC. My question is about the expense which incurred in 2020 but closing was in 2021 (different year). I had no base to report that expense in 2020 because the property was not closed yet in 2020. How can I "carryover" the expense to 2021 (the year the purchase was closed) for income tax purpose? Thanks again.

[superbean2008]

Just some background, my mortgage broker asked me to pay some expense during the mortgage process, so I have paid a few expenses in 2020 with receipts dated in Dec 2020 but the property was closed in Jan 2021. 

[ThomasM125]

You need to set up the property in TurboTax for depreciation, wherein you add the cost of the property as an asset. You can include any costs paid in 2020 to the cost of the property you enter in 2021.

[Carl]

Regardless of what tax year you may have started the process of acquiring real estate, any and all costs incurred are entered based on the tax year and date you actually close on the sale. Period. End of story.

- All costs associated with acquisition of the property are added to the cost basis of the property. Examples of this would be title transfer fees paid at the courthouse to remove the seller's name from the deed and replace it with the buyer's name.

- All costs associated with acquisition of the loan are flat out deductible. How they get deducted, depends on the nature of the real estate purchased. If your primary residence then these costs are fully deductible in the year of purchase. If for business property (such as rental property) then these costs are amortized and deducted over the life of the loan. Examples would include the loan application fee, as well as the cost of a property survey *IF* the lender required it as a condition of approving the loan.