Costs associated with the acquisition of the property are added to the cost basis of the property and depreciated over time (27.5 years). So they are included in the depreciation of the structure. For example, title transfer fees.
Cost associated with acquisition of the loan are amortized (not capitalized) and deducted (not depreciated) over time. For example, points.
To add your amortizable costs, in the assets/depreciation section select Add An Asset.
Select Intangibles, Other Property and continue.
Select Amortizable Intangibles, and continue.
Describe the Asset, (for example, call it Financing Fees) enter the cost, then the closing date of the loan and continue.
Select Purchased New, then YES used 100% for business, then enter the date the property was "available for rent" and continue.
For Code Section select 163 - Loan Fees and continue.
For Useful Life enter 27.5 (Many say it's 15, but click the blue word "life" on that screen. Then scroll down and you'll see in black and white that it clearly states residentail rental property is 27.5 years) Then continue.
Now on this screen you'll see it says "Years to fully depreciate". That's just a "standard" screen. It's not being depreciated over 27.5 years. It is "in fact" being deducted as it should be. You'll notice the asset category is L-Intangibles and that's what it should be.
