The first refinanced loan was with the same lender so you have calculated the appropriate amortization assuming you stopped it in August.
- If a mortgage loan is refinanced with the same lender, any remaining points must be added to the points on the new loan if applicable, then divided by the loan term to determine the monthly amount you can deduct. If there is a full year of mortgage payments then it would be 12 months deduction as points. For the first year it would be the number of months remaining in the year beginning with the first month payments begin and ending in December of that year.
The second refinance was with a different lender and you were allowed to deduct the remaining points for the previous loan in the year of refinance. In your example $1,201 was allowed to be deducted in 2015. A new amortization would have occurred with the new lender for any points on that loan if applicable (Capitol One).
- When a mortgage loan is refinanced and it is with a different lender, then any remaining points that have not been deducted under the first lender can be deducted in the year of refinance.
For the tax return for this year.
- Stop the amortization as of August 31st.
- The remainder is not deductible because it is no longer a rental property.
- Indicate the property was converted from rental to personal use. This will eliminate any sales questions.
- You could choose to capture the $1201 for 2024 with an accounting change using Form 3115 specifically for the amount of $1,201 that was not yet used due to the refinance with another lender. It must be reduced for any amount of depreciation on that amount alone that has been used from 2015-2023. See below.
- No deduction is allowed for the remainder of the amortization on the rental activity after August, 2024.
Next, for the prior amortization you have not used of the $1,201.
- You can use the following form to correct the depreciation for your rental property. Take any amount not previously expensed on prior returns, as an expense on the current year tax return as 'Other Expenses'.
Form 3115 Instruction: By including this with the current year tax return, you can complete everything on the 2024 tax return.
- Adopt a change in accounting method: This option allows you to go back as far as you need. Make the adjustment on your current year tax return to expense the missing amortization.
- Why am I adopting a change in accounting method? Not claiming amortization in two or more years indicates that you've chosen an accounting method without allowed amortization. In this case, you must now elect to change your accounting method to include amortization expense.
- You must use the TurboTax Desktop to complete this form. TurboTax doesn't help you with this form. And your return must be mailed because this form is not supported through e-file.
This must be completed and filed with the return on time.
You can change to TurboTax Desktop if you choose.
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