Sale or Trade of Business, Depreciation, Rentals > Rental Expenses versus Passive Activity Losses (PALs)

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Frequently Asked Tax Questions

Sale or Trade of Business, Depreciation, Rentals - Rental Expenses versus Passive Activity Losses (PALs)

Rev. date: 1/2009

I purchased a rental property last year. What closing costs can I deduct?

Closing Costs
Publication 551
Rental Property
Residential Rental Property (Including Rental of Vacation Homes)

The only deductible closing costs are those for interest and deductible real estate taxes.

Other settlement fees and closing costs for buying the property become additions to your basis in the property and part of your depreciation deduction, including:

Abstract fees
Charges for installing utility services
Legal fees
Recording fees
Surveys
Transfer taxes
Title insurance
Any amounts the seller owes that you agree to pay (such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions).

Rev. date: 1/2009

Can you deduct Private Mortgage Insurance (PMI) premiums on rental property? If so, which line item on Schedule E?

Mortgage Insurance Premiums
Qualified Mortgage Insurance Premiums
Rental Property
Residential Rental Property (Including Rental of Vacation Homes)
Supplemental Income and Loss

Yes. You can deduct Private Mortgage Insurance premium on line 9 of Form 1040, Schedule E (PDF), Supplemental Income and Loss. Write "PMI" on the dotted line.


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