I purchased a property for personal use in 2018 and converted it to rental use in 2019. I also refinanced it in 2019, after we began renting it out. I'm now trying to figure out how to treat the various property and mortgage costs, especially the non-points acquisition costs for the original mortgage. Below I lay out my general understanding, with some particular questions embedded. If you can help with the questions or confirm/contradict the general points, that would be much appreciated!
Home purchase costs (home itself, title-related fees, recording fees, etc.)
These are added to TurboTax as an asset and non-land value is depreciated over 27.5 years. (I assume I just record the original purchase cost and depreciation starts from the purchase date, but maybe I record the value on the date of conversion to rental and depreciation starts then? I'm not too worried about this, since it's easy to enter into TurboTax and let it sort it out.)
Mortgage points (original mortgage)
These were deducted (or at least deductible) on my personal income tax in 2018, so they should not be included in the rental property calculations at all. These include items identified as "points" or "loan origination fee" on the escrow statement.
Loan origination costs (original mortgage)
This includes all costs to acquire the mortgage except points, e.g., appraisal, credit report, lender's title insurance. These were not deductible on my personal income tax in 2018. If the property had been placed into rental use in 2018, they would be recorded as an asset and amortized over the life of the loan (30 years). But I didn't convert it to rental use until later. So this is my main question: when I convert the property to a rental, can I create an asset representing these costs and amortize them? This follows the idea that these costs go with the loan and are always amortized over its life, but the amortization is not tax deductible while the loan is used for a residence and becomes deductible when the loan is converted to being used for a rental property. And in that case, would I deduct the unamortized part as an expense when this loan is paid off (below)? Or instead, should these costs just be treated as non-deductible expenses for the personal home loan, that disappear in the year the loan is taken out?
Mortgage points and loan origination costs (refinance, different lender)
Since the refinanced loan was used for a rental property, all the points and other costs associated with the new loan are amortized over the life of the loan (by creating an intangible asset associated with the rental property).
Does this seem basically right? And again, my main question is, how should I treat the non-points costs of a mortgage that I first took out while I was living in the property, which I then converted to rental use and then refinanced? Should I just ignore these costs, since they were a non-deductible expense in the year the house was bought? Or should I amortize them over the life of the loan, treating the amortization as a non-deductible costs while I lived in the home, but then deducting it after I convert the home to a rental? And in the latter case, should I then deduct the unamortized part as an expense in the year when I refinanced?
Thanks for any help you can give!
