Does refinancing an investment property reset the capital gains clock?

Forum|Forum|4 years ago
March 18, 2022
2 replies
7 views

I bought a property that has always been a rental in Jan of 2018. I refinanced it in October of 2018. It was refinancing for the loan balance to get a lower rate. There was no ownership change involved in the refinance. Does the capital gains clock stay at Jan 2018 or does it reset to October 2021?

TurboTax Online

Best answer by RaifH

No, you do not have to wait. You acquired the property in 2018 originally, so it is a long-term capital gain. The day you acquire the property determines your holding period. Refinancing within the past year does not change that.

MaryK4

Level 15

You do not start depreciation again just because you refinanced the mortgage, you can continue with the same schedule you had.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

greg-kottner-gmaAuthor

Level 2

I should have been clearer with my question. I an looking to sell the property this year. Do I have to wait until October (one year after the refinance) or does that not matter with regards to long term capital gains?

RaifHAnswer

Level 10

Carl

Level 11

Nothing changes. But I would expect you to get two 1098-Mortgage Interest Statements for 2021. One for the old loan, and another for the new loan. Enter the one for the old loan first. Then when you enter the 2nd one, on one of the screens will be a selection you make to indicate that the 2nd loan is a refi. You'll need to deal with you're refi fees then.

If you refinanced with the same lender, then the remaining loan acquisition fees on the old loan are added to the loan acquisition fees for the new loan and that total is amortized and deducted over the life of the new loan.

If you refinanced with a different lender, the remaining fees on the old loan to be deducted, are fully deductible in the year of the refinance.