- Costs associated with acquisition of the property are added to the cost basis of the property in the tax year the property is acquired.
- Costs associated with acquisition of the loan are amortized and deducted over the life of the loan.
Therefore, your property acquisition costs "should" already be included in the cost basis and require no action on your part.
The loan acquisition costs "should" have been entered as such in the tax year you closed on the purchase of the property.
When you sell the property, any remaining amortized costs to be deducted, are fully deductible in the tax year you close on the sale. Assuming things were entered correctly in the tax year you purchased the property, here's how to deduct the remaining amortized costs in the tax year you sell the property.
DEDUCT FINANCING FEES OF OLD LOAN WHEN REFINANCING
In the Assets/Depreciation section for that rental property, elect to edit/update the entry for your points.
- On the "Review Information" screen click Continue.
- On the "Did you stop using this asset 2021?" screen, click YES.
- On the "Disposition Information" screen, in the disposition date box enter the date you closed on the new loan. Then click Continue.
- On the "Special Handling Required?" screen, click YES.
- On the "Depreciation Deduction Amount" screen, select Transfer These Fees For Me To Other Expenses. Then click Continue.
You'll see the remaining fees of the old loan to be deducted in the Rental Expenses section, very last screen of that section. The entry will start with "Unrealized Refinancing Fees...."
