Certain costs associated with a property's upkeep as well as the manner in which it was financed can be depreciated and therefore have a beneficial impact on the tax paid by the investor in a particular year. Which of the following cash outflows is deductible for income tax purposes in the year in which they are made?

Question

Quizplus · Accepted Answer

Operating expenses, such as property taxes, insurance, and maintenance costs, are deductible for income tax purposes in the year in which they are made. Capital expenditures, which are costs associated with improving the property, are not deductible in the year they are made, but rather must be depreciated over time. Up-front financing costs and repayment of principal are also not immediately deductible, but rather must be amortized over the life of the loan.

Certain Costs Associated with a Property's Upkeep as Well as the Manner