I'm not sure if the information from the On Demand Guidance will help, but I figured I'd post it just in case (for your perusal). Also, note that points you pay for refinancing are deductible regardless (over the life of the loan).
Ultimately, you need to determine whether the property is in service (available for rental use). If it is not (or you have personal use at the time), then those costs are simply not deductible.
What about the interest I paid on a refinanced mortgage?
When you refinance your home, you can usually deduct the entire amount of interest you paid on the loan for the refinance.
However, with a refinance loan, you can't deduct the portion of interest you paid on the new loan balance that is more than your old mortgage balance unless the excess was used to buy, build or substantially improve a principal residence or second home.
You can also deduct interest you paid on the old loan before you refinanced.
What are points and are they deductible?
Points are fees you pay to get a loan. These fees are also called: loan origination fees, maximum loan charges, loan discount, or discount points.
Points don't include broker fees, funding fees, processing fees, settlement fees or underwriting fees.
In general, points are deductible for loans you got to pay for your home in the year in which you pay them. Points paid on a loan you got to refinance your home are usually deducted over the life of the loan.
What if I have a second home?
A second home is a residence you own in addition to your primary home. You live in your primary home, but may use the second home as a vacation residence.
- If you rent out your second home for part of the year, make sure it qualifies as a "second home" for purposes of the home loan interest deduction. In order to deduct the home loan interest, you need to live in the home for 15 days or more, or use the home for more than 10% of the days that the home is rented, whichever is longer. If you use the home less than this during the year, it is not considered to be your second home.
- If you have more than one "second" home (this means you have a primary home plus two or more additional homes), only one of the additional homes can qualify as a "second" home for this deduction. You can change which home you claim as your "second" home from year to year, depending on which provides the greatest deduction.
- If you buy another "second" home during the year (for example, you have a primary home and one or more additional homes) you can treat the new home as your "second" home as of the purchase date.
If you sell your "second" home during the year, you can substitute another home as your "second" home as of the sale date. This presumes that you have a primary home and two or more "second" homes.
