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Category: Encontrando sus Deducciones

The closing statement to a real estate purchase contains many potential tax deductions for you. Treatment of closing statement line items differ depending on whether property is business (rental) property or used as a personal residence.

Below is a helpful table of typical tax treatments of major line items from your HUD-1 statement. However, there may also be certain items that are treated differently depending on your particular tax situation.

A notation of "basis" refers to costs that become part of the total capitalized cost of the property and not currently deductible, however, these costs can be deducted at the time of sale, or earlier using depreciation if they relate to rental property.

Deductible items are in bold. Nondeductible items are in red. If the item is not coded, in most cases, it is just added to the basis of your home. Note: How you treat each item also depends on whether the home is your Personal Residence (left column) or a Rental Property (right column).

 

HUD-1 Line #

Closing Statement

Description

Tax Treatment

Personal Residence

Tax Treatment

Rental Property

101

Contract Sales Price

Basis-is relevant if property is later sold or rented

Basis-building portion eligible for depreciation

102

Personal Property

Basis-is relevant if property is later sold or rented

Basis-eligible for accelerated depreciation

103

Settlement Charges

See lines 700-1305 below

See lines 700-1305 below

104-105

Miscellaneous

Varies

Varies

106

City/Town Taxes

Deductible as itemized deduction*

Deductible as rental expense*

107

County Taxes

Deductible as itemized deduction*

Deductible as rental expense*

108

Assessments

 

LID assessments are part of basis, other assessments are typically deductible*

109-112

Miscellaneous

Varies

Varies

210

City/Town Taxes

*This credit reduces deductible taxes on Line 106 above

*This credit reduces taxes on Line 106 above

211

County Taxes

*This credit reduces deductible taxes on Line 107 above

*This credit reduces deductible taxes on Line 107 above

212

Assessments

*This credit reduces assessments on Line 108 above

*This credit reduces assessments on Line 108 above

213-216

Miscellaneous

Varies

Varies

700-703

Sales & Realtors Commissions

Basis

Basis

801

Loan Origination Fee

Deductible as itemized deduction (points)

Amortized over term of mortgage

802

Loan Discount

Deductible as itemized deduction (points)

Amortized over term of mortgage

803

Appraisal Fee

Basis

Basis

804

Credit Report

Non-deductible

Basis

805

Inspection Fee

Basis

Basis

806

Mortgage Insurance Fee

Non-deductible

Amortized over term of mortgage

807

Assumption Fee

Non-deductible

Amortized over term of mortgage

808-811

Miscellaneous

Varies

Varies

901

Prorated Interest

Deductible as itemized deduction – typically included in year-end interest statement

Deductible as rental expense – typically included in year-end interest statement

902

Mortgage Insurance (PMI)

 

Amortized over term of mortgage

903

Hazard Insurance

Non-deductible

Deductible as rental expense

904-905

Miscellaneous

Varies

Varies

1001

Hazard Insurance

Non-deductible

Reserves-deductible when paid from escrow

1002

Mortgage Insurance

Non-deductible

Reserves-amortizable when paid from escrow

1003

City Property Taxes

Reserves-deductible as itemized deduction when paid from escrow

Reserves-deductible when paid from escrow

1004

County Property Taxes

Reserves-deductible as itemized deduction when paid from escrow

Reserves-deductible when paid from escrow

1005

Assessments

Varies

Varies

1006-1008

Miscellaneous

Varies

Varies

1101

Settlement Fees

Basis

Basis

1102

Abstract or Title Search

Basis

Basis

1103

Title Examination

Basis

Basis

1104

Title Insurance Binder

Basis

Basis

1105

Document Preparation

Basis

Basis

1106

Notary Fees

Basis

Basis

1107

Attorney’s Fees

Basis

Typically part of basis, if tenant related may be amortized over term of lease(s)

1108-1110

Title Insurance

Basis

Basis

1111-1113

Miscellaneous

Varies

Varies

1201

Recording Fees

Basis

Basis

1202

City/County Tax Stamps

Basis

Basis

1203

State Tax/Stamps

Basis

Basis

1204-1205

Miscellaneous

Varies

Varies

1301

Survey

Basis

Basis

1302

Past Inspection

Basis

Basis

1303-1305

Miscellaneous

Varies

Varies

 

The above table summarizes tax treatment to buyers of properties – for sellers, these costs (including remaining basis) are deducted at the time of sale, with the exception of costs that are specifically noted as non-deductible.   Of course, capital gains may not be recognized if the property is a personal residence qualifying for the $250,000/$500,000 capital gain exclusion, or a rental property disposed of via a tax free exchange.