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Appraisal Expenses

Whether you are a real estate agent, landlord, tasker, rideshare driver, or any other type of Entrepreneur you may be able to benefit from deducting appraisal costs you incur in connection with your business. To name a few, appraisal costs can be deductible if you experience a casualty loss and pay an appraisal fee as part of your insurance claim, donate assets to charity, or acquire property for your business. Keep track of your appraisal expenses as it could end up saving you money come tax time.

LANDLORD / AIRBNB HOST

Last year Devon purchased two real estate properties and paid appraisal fees for both of them. Devon ended up using the first property to host short-term Airbnb guests and he moved into the the second property. When filing his tax return, Devin could deduct the appraisal expenses for the first property on his Schedule E, but he would not be allowed to deduct any appraisal costs for the second property since he uses it as his personal home.

UBER DRIVER / RIDESHARE

Chung is a full time uber driver who just purchased a new car for his rideshare business. Chung decided that instead of selling his old rideshare vehicle he would donate it to charity. Since he knew his car was worth more than $5,000 he paid an appraiser $300 to determine its fair market value. If Chung itemizes his deductions, the $300 appraisal fee would be deductible as a miscellaneous item on his Schedule A. Note that even though he donated a vehicle that was used for business purposes the appraisal cost is included as an individual deduction since generally, donations to charity and costs associated with making a donation are not deductible on Schedule C.

LANDLORD

Ms. Lopez is landlord who manages a long-term rental down the street from her personal residence. One unforgettable evening while everyone was away the electrical unit in her rental home malfunctioned and started a fire, causing the entire house to burn down. Luckily Ms. Lopez had insurance so she proceeded with filing a claim for her loss. As part of her claim, she paid an appraiser $2,000 to estimate what the fair market value of her rental home was before it burned down. When she prepares her Schedule E she can deduct the $2,000 appraisal fee.

ENTREPRENEUR

Mihnea, a freelance software developer, is creating a new software to help disabled children learn to read. To continue developing his product Mihnea needs to seek outside investment, so he paid a an accounting firm $4,000 to value his business. This appraisal fee would be considered a deductible business expense when Mihnea prepares his Schedule C.

ARTIST

Simon is a successful actor based out in Hollywood, California. Last year, Simon appeared in three plays and two commercials, earning enough money to purchase a larger home for his family. Before submitting an offer on the home, Simon paid $5,000 to have the home appraised. Much to his dismay, at the end of the year his accountant informed him that he would not be eligible to deduct the appraisal expense since it was for his personal home and not related to his business.

HOW HURDLR WORKS FOR
ENTREPRENEURS

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RULES FOR DEDUCTING APPRAISAL COSTS

Generally, appraisal fees will be deductible on your Schedule C or Schedule E if the appraisal is conducted for business reasons.
If you are buying or selling a personal property appraisal fees are not deductible. Note however that if you are a real estate agent who pays for an appraiser to help you sell a clients personal home, the appraisal fee would be considered a deductible business expense for you.
If you donate property to charity that is valued over $5,000 the IRS requires you obtain an appraisal to determine the fair market value of the property. Note that the fees you pay to determine the fair market value of donated property are generally deductible on your Schedule A as a miscellaneous deduction, not your Schedule C or E.
Fees paid to determine the value of your business in most cases will qualify as deductible appraisal expenses.
Appraisal fees paid to determine the value of damaged business property are usually deductible.

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