Investor Closing Cost & Cost Basis Calculator
Allocate every closing cost to its tax destination — capitalised into basis, amortised over the loan, or deducted now — because that split drives depreciation for 27.5 years.
Closing Cost Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- US federal treatment for a residential rental; commercial uses 39 years and other jurisdictions differ entirely.
- Not tax advice — allocation questions at the margin belong with a professional.
- Cost segregation, which can reclassify components to shorter lives, is not modelled.
In short: Closing costs have three tax destinations, not one. On a 1,050,000 purchase, 13,400 capitalises into basis and lifts annual depreciation by 389.82, worth 10,720 of extra deductions over 27.5 years. Only 10,380 is deductible now.
Formula
basis = price + capitalised acquisition costs
depreciable = basis × (1 − land share) · annual = depreciable ÷ 27.5
[('capitalised', 'acquisition costs added to basis'), ('amortised', 'loan costs spread over the loan term'), ('deducted', 'prepaid operating items, deductible now'), ('land share', 'never depreciable, recovered only on sale')]
Worked Example
- Separate acquisition costs from loan costs from prepaid items.
- Add acquisition costs to the purchase price for total basis.
- Apply the land allocation and exclude that portion.
- Divide the building basis by 27.5 for the annual deduction.
- Amortise loan costs separately, and deduct only genuine prepaid expenses now.
On a 1,050,000 purchase, 13,400 of title, transfer tax and legal costs capitalise into a basis of 1,063,400. At a 20% land allocation the depreciable building basis is 850,720, giving 30,935.27 a year against 30,545.45 if the costs had been ignored — 389.82 extra annually and 10,720 over the full period. Meanwhile 11,450 of loan costs amortise at 381.67 a year, and only 10,380 is deductible immediately. The true cap rate on the 35,230 of all-in cost is 7.7624% rather than the headline 8.0229%.
Strengths & Limits Of This Model
Where this engine is strong
- Allocates every cost to its correct tax destination
- Quantifies the 27.5-year value of capitalising properly
- Computes the true cap rate on all-in capital deployed
Where it stops
- US residential rules
- Cost segregation not modelled
Practical Use Cases
Filing the first Schedule E
Allocating settlement statement lines to the right tax treatment.
Setting up a depreciation schedule
Establishing the basis the next 27.5 years will run on.
Comparing two acquisitions
Judging on all-in cost rather than headline price.
Reviewing a completed purchase
Finding capitalisable costs that were expensed or missed.
Planning a refinance
Knowing that unamortised loan costs generally accelerate.
Methodology & Editorial Standards
Costs are allocated to three destinations following the standard treatment for an investment property: acquisition costs capitalise into basis, loan costs amortise over the stated term, and prepaid operating items deduct in the year paid. The page computes depreciation both with and without capitalised costs so the benefit is demonstrated rather than asserted, and the lifetime figure is shown to equal the capitalised costs multiplied by the building share exactly. The all-in cap rate uses total capital deployed rather than price.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
Closing Cost Calculator — 10 Expert FAQs
10 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
Which closing costs add to my basis?
Costs of acquiring the property itself: title insurance and search, escrow and settlement fees, recording charges, transfer and stamp taxes, legal fees, survey and inspection. These are capitalised and recovered through depreciation rather than deducted in the year of purchase.
Can I deduct loan points on a rental?
Not immediately. The rule allowing points to be deducted in full applies to a principal residence purchase. On a rental, points and loan origination costs are amortised over the term of the loan. If you refinance or sell before the term ends, the unamortised balance generally becomes deductible in that year.
Why does the land allocation matter so much?
Because land is never depreciable, the split decides how much of your purchase generates deductions at all. An unexamined fifty per cent land assumption can halve the deduction, while a documented fifteen to twenty-five per cent often stands. County assessor ratios are the usual audit-defensible support.
Is an escrow deposit a closing cost?
It is cash you must bring, but it is not a cost and not a deduction. The deposit is your money held on account by the escrow agent, and it becomes deductible only when the agent actually pays the property tax or insurance premium. Treating the deposit itself as an expense is a common error.
How does this differ from the mortgage closing cost page?
That page answers how much cash you need at settlement. This one answers where each dollar goes for tax purposes, which is a different question with different arithmetic. The cash figure matters once; the basis allocation matters for the next 27.5 years.
What if I already filed and got the allocation wrong?
It is generally fixable. Depreciation is treated as allowed or allowable, so an understated basis costs you deductions without reducing recapture. A change in accounting method filing can usually catch up missed depreciation in a single year rather than requiring amended returns. Take it to a professional.
Do capitalised costs on the land portion just disappear?
No, they are not lost, only deferred differently. The land share of capitalised costs increases your basis in the land, which reduces your taxable gain when you sell. It simply never generates an annual depreciation deduction along the way.
Should I include costs of a failed purchase?
Costs on a deal that did not complete are generally treated differently from those on one that did, and the treatment depends on whether you were already in the business of investing. This is a genuine grey area and worth a professional's view rather than an assumption.
Does this change my cap rate?
Yes, and materially. A cap rate quoted on the purchase price ignores the fact that you deployed more capital than the price. Computed on all-in cost the yield here falls by more than a quarter of a point, which is the difference between two properties in most comparisons.
What about capital improvements after purchase?
They are capitalised too, but on their own schedules starting when placed in service. A new roof is not added to the original basis and depreciated from the purchase date; it begins its own 27.5-year recovery. Repairs, by contrast, are deducted in the year incurred, and the line between the two is one of the most litigated questions in rental taxation.