Home inspection cost on a new rental

[bmshah1]

We bought a new house as a rental last year. The house was newly constructed and was placed in rent within 30 days of purchase. Can I deduct the cost of home inspection as part of my expense for the rental?

[AnnetteB6]

If the inspection was done prior to the property being placed into service as a rental, then add the inspection cost to the basis of the property.  

If it was done after the property was placed into service as a rental, then you can include it as a rental expense for the property.  

[bmshah1]

@AnnetteB6 the inspection was done prior to the property being placed into service. When you say add the inspection cost to the basis of the property do you mean increase the purchase price by that amount?

[PatriciaV]

Yes, the survey cost increases your "purchase price" for the rental property. You would include this amount when you add the residence as a Rental Property Asset for this activity.

Additional Information: How do I handle capital improvements and depreciation for my rental?

[bmshah1]

@PatriciaV thanks for the response. From what I have seen in IRS pub 527 and my research online only the following can be added to the base price. Under what category would home inspection fall? Please note it is NOT  land survey cost but an actual home inspection to find any issues with the house. 

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

[BrittanyS]

Yes, the home inspection would be added to the cost basis when purchasing the rental property.  According to IRS Publication 551, "The basis of property you buy is usually its cost. The cost is the amount you pay in cash, debt obligations, other property, or services."  The home inspection would be considered a service.  For more information see the link below:

• Publication 551

@bmshah1 

[bmshah1]

@BrittanyS how do I add the home inspection to my cost basis in TT?

[BrittanyS]

Since the inspection was done before the rental property purchase, you will add the inspection price to the purchase price.  To enter this, follow these steps:

1. Log into TurboTax
2. Select Wages and Income
3. Select Rental Properties
4. Select Edit next to the rental property
5. Select the box for New Rental Property
6. Select Edit next to new rental property under assets
7. Under "Tell us more about the purchase of your property", enter the total purchase price (purchase price + inspection price) under original purchase price

@bmshah1