Is A Property Valuation Fee Tax Deductible?

A property valuation fee is tax deductible in the following situations:

  • A valuation is required to pay for an investment property.
  • A valuation is required to be done on a PPR (Principle Place of Residence) for the purpose of refinancing in order to acquire an investment property.
  • A valuation is required to refinance an investment property for the purpose of purchasing more investments.

When a buyer purchases an investment property, the applicable property valuation fees can be spread and deducted over the term of the mortgage as a qualified expense. Other situations where a property valuation fee may become tax deductible is when a property valuation is done for a charitable donation of a property, and where there has been a severe casualty loss to a property.

When is a property valuation fee not tax deductible?

Property valuations for the purpose of refinancing or buying an owner-occupied home are not tax deductible. Also, if a property valuation is done for other purposes besides investment then it will likely not be tax deductible. This could mean a situation where:

  • You’re doing a property valuation in order to obtain an equity loan to pay for a holiday.
  • You’re doing a property valuation for the purpose of purchasing your home or Principle Place of Residence.
  • You’re doing a property valuation for the purpose of selling your Principle Place of Residence.

Note that the above are not the only situations where a property valuation fee tax is not deductible. Also, if a property valuation is required to help make a decision on whether to purchase a business, it is generally regarded as a capital cost and is not an allowable deduction.

Is a property valuation on a Principle Place of Residence tax deductible?

A property valuation that is needed to obtain a mortgage on a Principle Place of Residence is not a tax-deductible item. Whether you are buying a property or refinancing your PPR, a property valuation is not qualified to be written off. A property valuation is regarded as a one-time cost of getting a mortgage loan, not pertinent to real estate tax charges or the interest paid, which are both deductible items.

Is a property valuation on an investment property tax deductible?

Like some other closing costs, a property appraisal becomes tax deductible when done for an investment property, as it is considered a business expense for investment purposes. This is expected as purchasing an investment property would normally bring many other factors into consideration for tax deductibility. For instance, with investment properties, owners are permitted to deduct costs such as, license fees, pest control, maintenance and repairs, accounting and legal fees, as well as other operating expenses.

Is a property valuation fee tax deductible in the case of a casualty loss?

A property tax fee may be deductible if you have suffered some sort of casualty loss to your property. In the event of a casualty loss, you are likely to need a property valuation to determine the value of the house in its present state, that is, after the loss, as well as its value after all repairs have been made.

Such casualty losses refer to the partial or complete destruction of a house as a result of a particular event that is unusual, sudden and fast-moving, or unexpected and not caused intentionally. For example, damage as a result of a flood, earthquake, or an accidental fire. While the cost of the property valuation for these purposes can be written off as tax deductible, it should not be deducted if the owner of the appraised property is compensated by their insurance company. This is so because in such a situation, they would not have suffered a financial loss for the cost of the valuation.

Is a property valuation fee tax deductible in the case of charitable donations?

In a situation where a property owner would like to donate a piece of real estate to a non-profit charity, both the donor and the recipient must come to an agreement regarding the value of the gift. To determine the value of the property, the most reliable way will be to perform a valuation to arrive at an acceptable estimated value for the property. The donor, who is the taxpayer, can pay the required fees for the valuation and deduct the cost as a part of the gift. Even in a situation where the building has to be demolished, a valuation remains a tax deductible item.

Do I really need to get a property valuation?

A property valuation is a necessity for many transactions and legal proceedings. It’s often required when there is a need to settle issues around divorce, estate, or taxes. It is a crucial part of selling your property because a valuation will show the worth of your property on the market and help you make an informed decision on what price to put your house on the market for.

Likewise, if you’re looking to purchase a property, you’ll need a valuation report to ensure you’re not paying a much higher price for a property worth less than the asking price. Also, lenders will only offer a mortgage loan based on the value of a property as evidenced in a valuation report performed by an independent surveyor or appraiser they approve of. Finally, valuations are necessary in situations of transfer of ownership of properties other than via sales.

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Published on 1st June 2017

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