I bought a 2BR condo that was a foreclosure $101k. On top of the usual closing costs, I had to pay $9000 in back assessments and $1500 additional fee to my agent.
I plan to live in this condo only on weekends but also have paying roommates. Of course I will be reporting all income on Schedule E. But are any of my closing costs deductible expenses? Or how do I account for those down the road when I sell the place?
wrote
The assessments are only deductible if they would have normally been deductible. So CAM fees, probably not deductible, nor do they add to basis as I see it.
On Schedule E you would portion out your "personal use" time/space toward the costs & expenses. Personal use time and space is not deductible except for that portion of mortgage interest and property taxes, which fall to Schedule A, and might be moot depending on filing status and future tax laws. Since you use the property for more than 14 days, losses might be restricted.
Paul - wouldn't the facts support treating the property as X% (I was thinking half, but OP said roommates) rental property from the get-go, i.e. with half the closing costs or any other cost one could write off as rental, and the other half treated as owner occupied. Same for the depreciation aspect, whatever percent is deemed rental property gets depreciated as well.
I would consider the back assessments to add to the basis; they're part of purchasing the condo. The agent's fee would be similar. The total purchase transaction: write a check for $111,500 and get the condo free and clear. Why wouldn't the entire amount be the basis?
Seth
Suppose the purchase was a full rental. Then would the CAM fees be added to the basis or deducted? I'm not sure, although Alan suggested that it is an expense and therefore would be deducted if this were a rental. My reasoning is that the treatment has to be consistent: If you deduct the CAM fees as an expense, then when the house is a full rental you deduct it on Schedule E, and if the house is full personal then you can't deduct it at all. If the CAM fee is added to the basis, then it gets added to the basis regardless of rental or personal.
CAM fees while you own it are deductible for a rental, and personal for a personally-used property. Arrears CAM fees paid at purchase are part of the purchase price. (Suppose the condo said, instead, that the transfer couldn't take place unless the arrears CAM fees were paid, so the seller raised the price by the amount of those fees and paid them. Why should that make a difference?)
Seth
"Seth" wrote
If paid at closing from the sellers proceeds, who cares. If paid by the buyer, then it does matter. It's going to matter what those fees are/were for.
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