The basics for closing costs:
- Costs associated with acquisition of the property are capitalized and depreciated; meaning they are added to the cost basis of the property. An example would be transfer fees paid at the courthouse to remove the seller's name from the deed and replace it with the buyer's name.
- Cost associated with acquisition of the loan are amortized and deducted (not depreciated) over the life of the loan. An example would include loan application fees paid to the lender. These costs should be entered as a physically separate asset in the assets/depreciation section as "other" asset and identified as loan fees. If I recall correctly, you select the one for SEC163 Loan Fees, or something like that.
When you sell a property, any remaining fees to be deducted are fully deductible in the year of sale.
If you refinance the property, how remaining loan fees are dealt with depends on weather you refinance with the same lender, or a new lender.
