These would be yearly deductions on Schedule E. Any balance at sale is deductible.
The costs associated with obtaining a mortgage on rental property are amortized (spread out) over the life of the loan. For example, if it cost you $3,000 to refinance your 30-year mortgage, you'd be able to deduct $100 per year for the next 30 years.
Other refinance-related expenses not directly related to the mortgage may also be deductible. Generally, if the cost is associated with operating the property (like real estate taxes or hazard insurance) they're deducted as expenses, whereas costs associated with purchasing the property (like title search fees or recording fees) are added to the property's cost basis, which means they get depreciated.
Please see this additional information from PattiF.
Go to Your Property Assets page- Along with your rental, you should see your original refinancing fees and the depreciation amount.
- Select Edit. Continue through page descriptions of prior fees. Check box, the item was sold, retired or disposed of and the date of your new fees as the date sold.
- Continue to Confirm your Prior Amortization page.
- Select Yes on the Special Handling Required page, because the last option is true.
- Continue to next page and select radio button Transfer these fees for me to Other Expenses. View Sch. E (page 1) in forms mode to verify remaining depreciation and transfer to Other Expenses.
End result: Current depreciation amount for old loan. Remaining unamortized balance to be transferred to other expense line. Your old fees may still show on the asset page if you still have some depreciation for the current year, but it will not be listed there in the next year
Add your New Loan Fees as a new asset. On the Your Property Assets page, click Add an Asset link to enter data for new loan fees.
