Cost associated with acquisition of the property are added to the cost basis of the property and depreciated over time. With a refinance, you don't have any of these costs.
Cost associated with acquisition of the loan are amortized and deducted over the life of the loan. These are the only costs you should have.
Take a look in the Assets/Depreciation section and you should see an entry there for those amortized costs. If those costs are not there, here's how to enter them manually.
- Select the Add and Asset button. (go straight to the asset summary if presented that option)
- Select Intangibles/Other Property, then continue.
- Select Amortizable Intangibles, then continue.
- Describe it as something like "2021 Financing Fees". Then enter the amount, and the closing date of the loan. Then continue.
- Select "purchased new", then "100% business use", enter the closing date of the loan (again), then continue.
- Code section is 163:Loan Fees, then continue.
- Useful LIfe in Years is the length of the loan, then continue.
- You can "show details" if you like. Then continue, and that does it
Now, if you refinanced with the same lender, then you can not deduct any remaining amount to be amortized on the old loan. You have to add the remaining amount to the refi fees of the new loan, and that new total gets amortized/deducted over the life of the new loan.
If you refinanced with a different lender, then any remaining amount to be deducted on the old loan are fully deductible in the year of the refi. Here's how that's done, assuming it was entered correctly when you initially purchased the property all those years ago.
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...."
