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Is the appraisal fee tax deductible for a FAILED refinance of a rental property?

I wanted to refinance my rental property, so the bank ordered an appraisal and I paid out of pocket for it. The appraisal didn't come in as high as I wanted, so I backed out of the refinance. Is the appraisal tax deductible in this situation? I didn't get any new loans and everything still stayed the same...

If the appraisal is deductible, what type of expense is it?

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2 Replies
PatriciaV
Employee Tax Expert

Is the appraisal fee tax deductible for a FAILED refinance of a rental property?

An appraisal fee would be considered a miscellaneous expense for your Rental Property, as long as it was for business purposes. There is no rule that an appraisal must be part of a sale or loan transaction.

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Carl
Level 15

Is the appraisal fee tax deductible for a FAILED refinance of a rental property?

From what I can find is IRS Publication 527, your scenario is not addressed. What it does say is that appraisal fees required by the lender as a condition of loan approval are included in the loan acquisition costs and amortized over the life of the loan. Other than that, I don't know if the IRS would question the "business need" for your appraisal. But you're not talking a whole lot there. I'd go ahead and claim it with the expectation that should my return be pulled for random audit, I may not be able to justify the deduction unless I can produce a disapproved loan application.

 

 

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