Taxes and Your Home Inspection
Buying a new home is a significant investment that comes with a good amount of tax breaks.
A common question often asked, “Can I Deduct a Home Inspection on My Taxes”?
The short answer is “no.”
While there are many tax benefits to owning a home, deducting the home inspection, unfortunately, is not one of them. However, if it’s an investment property, such as a rental, deduct away.
Tip: If you are starting the process and have a moderate amount of flexibility, consider purchasing a multiplex. You can live in one of the units and rent out the others. In that instance, you can deduct your inspection cost since it is now considered a business expense.
When you purchase a home, you may hear that closing costs are deductible. Closing costs or settlement costs (they’re the same thing), often get split between the buyer and the seller. Your escrow closing statement will have an itemized list of the costs paid at closing. The mortgage interest and the property tax paid is deductible. Borrowers pay points when closing the loan to reduce the interest rate; these are usually deductible.
- General home inspection
- Specialized contractor inspections (e.g., plumbing, HVAC, etc.)
- Recording fees
- Title insurance
While these items are not deductible, they get added to the basis of your home. This means that when you sell your home, the costs are added to the original purchase price to determine capital gains. For example, if you bought a house for $850,000 and paid $1,200 in non-deductible fees, your new cost basis is $851,200.
Investment Property Expenses
It is considered an investment property when you are not using the single-family property as your residence or personal vacation home. The IRS allows rental property owners to deduct many more expenses because it is now considered a business. I suggest you contact your Accountant or Tax Attorney for specifics.
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