I refinanced my primary residence in 2020. In 2021, my primary residence became a rental property. Can I deduct the refinancing fees from the previous year starting in 2021? If yes, could you explain the steps to do this in Turbotax.
No, you can not deduct the refinancing of your primary residence from previous years on your 2021 Tax return.
Since it was your primary residence in 2020, your financing fees were fully deductible on your 2020 tax return. You can't claim them again when you convert the property to a rental in 2021 or after.
refi fees would be amortizable over the life of the mortgage so part was deductible in 2020. ant remainder would transfer with the property to rental status still amortizable, but can't say TT can handle this.
refi fees would be amortizable over the life of the mortgage so part was deductible in 2020.
At first, I was going to disagree with this. Double-checked myself with IRS Pub 936 pages 5, 6 and 7 at https://www.irs.gov/pub/irs-pdf/p936.pdf.
From what I understand, the borrower has a choice here. However, depending on the choice selected certain criteria may have to be met as outlined in Pub 936.
So if the borrower meets the conditions to amortize, then I'd recommend they go ahead and amortize applicable costs over the life of the loan. Now for the repetitive stuff for others reading this thread.
- Expenses incurred for acquisition of the loan are amortized and deducted over the life of the loan. Examples of this include property survey costs if a survey is required as a condition of loan approval, as well as loan application fees.
- Expenses incurred for acquisition of the property are added to the cost basis of the property. Examples of this include transfer fees paid at the courthouse to transfer ownership from the seller to the buyer. These fees are sometimes called tax transfer fees, document fees, tax stamps or document stamps.