@californiasteven here's what I consider "the simplicity" of this.
- Fees/charges associated with acquisition of the property are added to the costs basis of the property. For example, title transfer fees.
- Fee/charges associated with acquisition of the loan are amortized (not capitalized) and deducted (not depreciated) over the life of the loan.
If your funding fee is label "MPI" or "PMI" then it's in box 5 of your 1098 Mortgage Interest Satement. After entering the 1098 in the program you have to select the option (if presented) that you'll deduct it over the life of the loan.
Otherwise, here's how to enter the total of all your loan acquisition fees.
- In the assets/depreciation section select Add Another Asset.
- Select Intangibles, Other Property and continue.
- Select Amortization Intangibles, continue.
- Call it loan fees or whatever in the description, the total cost, and the closing date of the loan. Doesn't matter that it was years ago either. Then continue.
- Select Purchased new, then NO not always used 100% business, then "used for personal use first", then enter the date you converted the property to rental. Next, percentage of business use will be 100% (yes, one hundred precent) because it was one hundred percent business use "AFTER" you converted the property to rental. Then continue.
- Your code section is 163: Loan Fees, continue.
- Useful life is 27.5 and continue.
- Feel free to review, then press on with life. 🙂
