Yes, the refinancing costs should be amortized until the house is sold, in the year of sale you will deduct the remaining amount that has not yet been amortized.
Closing costs at the time of purchases of the house are added to the cost basis of the house and included as part of the house for depreciation. All of this will determine and adjust your cost basis of the house. If you have not previously included this with your cost basis, this would be another item that could be added on amendments or Form 3115, as explained in your other post.
Settlement fees and closing costs for buying the property become additions to your basis in the property and part of your depreciation deduction, including:
- Abstract fees
- Charges for installing utility services
- Legal fees
- Recording fees
- Surveys
- Transfer taxes
- Title insurance
- Any amounts the seller owes that you agree to pay (such as back taxes or interest, recording or mortgage fees, sales commissions and charges for improvements or repairs).
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If your income is high enough that you would be in a tax bracket higher than 25%, then your gain to the extent of depreciation will not be taxed higher than 25%. If your income is already at a lower tax rate, that gain will be taxed at a lower rate.
Yes, the passive loss carryforward will be deducted as ordinary income in full in the year of sale as ordinary income. It will reduce your income dollar for dollar in the year of sale, first any rental income and then other income if applicable. Your loss carryforward incorporates all expenses, including depreciation, that have exceeded the rental income in the past.
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