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Level 3

Can I deduct previous points/fees on the loan for my Rental Property?

I refinanced my Rental in 2015.  I previously did a refinance in 2012 and was amortizing the points/fees.  I want to deduct/bring forward the remaining amount.  When I click on the "edit" in the Asset Summary page and tell it that I have sold/disposed of the asset, it continues to amortize it.  What am I doing wrong?

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Employee Tax Expert

Can I deduct previous points/fees on the loan for my Rental Property?

Remove and list prior amortization as an expense. My assumptions for this example: Old loan fees placed in service 6/1/2012. New loan fees placed in service 6/1/2015. Old Loan fees $2k, half-year conv.

1st Part: Your Property Assets page- Along with your rental, you should see your 2012 refinancing fees and the depreciation amount. Select Edit. Continue through page descriptions of prior fees. Check box, the item was sold, retired or disposed of and the date of your new fees as the date sold, 6/1/2015. Continue to Confirm your Prior Amortization page. Select Yes on the Special Handling Required page, because the last option is true. Continue to next page and select radio button Transfer these fees for me to Other Expenses. View Sch. E (page 1) in forms mode to verify remaining depreciation and transfer to Other Expenses.

End result: Current depreciation amount for old loan $56. $1600 remaining unamortized balance to be transferred to other expense line. Your old fees may still show on the asset page if you still have some depreciation for the current year (as is the case for my example), but it will not be listed there in 2016.

2nd Part: Add your 2015 New Loan Fees as a new asset. On the Your Property Assets page, click Add an Asset link to enter data for new loan fees, 6/1/2015. 

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11 Replies
Highlighted
Employee Tax Expert

Can I deduct previous points/fees on the loan for my Rental Property?

Remove and list prior amortization as an expense. My assumptions for this example: Old loan fees placed in service 6/1/2012. New loan fees placed in service 6/1/2015. Old Loan fees $2k, half-year conv.

1st Part: Your Property Assets page- Along with your rental, you should see your 2012 refinancing fees and the depreciation amount. Select Edit. Continue through page descriptions of prior fees. Check box, the item was sold, retired or disposed of and the date of your new fees as the date sold, 6/1/2015. Continue to Confirm your Prior Amortization page. Select Yes on the Special Handling Required page, because the last option is true. Continue to next page and select radio button Transfer these fees for me to Other Expenses. View Sch. E (page 1) in forms mode to verify remaining depreciation and transfer to Other Expenses.

End result: Current depreciation amount for old loan $56. $1600 remaining unamortized balance to be transferred to other expense line. Your old fees may still show on the asset page if you still have some depreciation for the current year (as is the case for my example), but it will not be listed there in 2016.

2nd Part: Add your 2015 New Loan Fees as a new asset. On the Your Property Assets page, click Add an Asset link to enter data for new loan fees, 6/1/2015. 

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Employee Tax Expert

Can I deduct previous points/fees on the loan for my Rental Property?

Don't mark that box unless you sold your rental. You will enter the unamortized portion of your prior points in the Expenses section of your Rental Summary. 

Continue and you will reach the Want to Review Your Refinance? page. Answer Yes to the first box and continue. From here you will enter the new mortgage info. Continue and you will reach Deduction Amounts Results. Mark the first button, I have prior refinance fees let's take care of this now.  Proceed through interview.

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Level 3

Can I deduct previous points/fees on the loan for my Rental Property?

Thanks for the answer.  I have followed those questions.  It still will place it as an asset and depreciate it.  After the "i Have prior fees let's take care of that now" I say "yes" and press continue.  It then goes to the screen "Did you buy any items that cost $2500 or less in 2015? I say "yes" (I bought a dishwasher).  It then goes through a series of questions to see if I want to deduct it as an expense.  I say "yes" to those questions.  It then sends me to the Asset Summary page and I'm back to square one.....everything is depreciated.  It has to be a program glitch, I've tried everything?
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Employee Tax Expert

Can I deduct previous points/fees on the loan for my Rental Property?

It isn't easy to find, I agree. You should see Intangibles, Other Property. Amortizable Intangible Property. Drill down from there and you will get to Confirm Your Prior Amortization page.
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Level 3

Can I deduct previous points/fees on the loan for my Rental Property?

I get to that...and I try to dispose of the asset (Points/Fees).  I then enter the date of disposition (The date of my refinance).  Then it just goes to the page that shows it amortizing again for 2015.  ????
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Employee Tax Expert

Can I deduct previous points/fees on the loan for my Rental Property?

See if this makes sense below. You will find the prior amortization fees in the asset/depreciation section.

Refinance Fees from Prior Refinances

Charges paid by a borrower to get a mortgage refinance for a rental must be amortized over the life of the loan. In the year you refinance to a new loan (and retire the prior loan), any existing refinance fees from any prior refinances become an expense and need to be entered in as an "Other Expense" item. If the mortgage is financed with the same lender, the unamortized fees on the first loan must be deducted over the term of the new loan.

How Do I Do This in TurboTax?

Points are entered in the same area of interview where you track the depreciation of your rental property, or rental furnishings. Go to the Asset/Depreciation topic and indicate your prior loan fees are no longer in service. As you go through this area of interview you will be given the remaining fees that have not been expensed or amortized. These additional expenses need to be entered as an "Other Expense" item. TurboTax will help guide you along the way. Completing this is a three-step process:

  1) Enter your new refinancing information as an amortizable intangible
  2) Navigate to the Depreciation Section in Rentals and indicate you have retired ("disposed" of) the old refinance fees
  3) Calculate the unused portion of the old refinance fees and enter them as an "Other Expense"
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Level 3

Can I deduct previous points/fees on the loan for my Rental Property?

Thanks you for your help....it is still not working.  I've done what you have said and I don't know why it won't work (I've started over,  tried it several times, etc).   Once I tell it that the old points are "disposed of" , it then ask me for the date they were "disposed",  I do that .  Instead of taking me to the "Other Expense" screen,  it goes to the screen that says....my 2015 amortized amount is_________.  It doesn't show it as disposed.  It is as if it is still an asset.  There is no mention of "other expense".  It is like the program is not recognizing it as a disposed of asset.   I'll I can think is that it is a software issue. I have a call into TurboTax.  I'll see what they say.   Once this puzzle gets figured out, I'll let you know.
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Level 3

Can I deduct previous points/fees on the loan for my Rental Property?

TorboTax PaulaM are you still following this question?  I still can't get to the "Other Expense" screen. I worked with TurboTax on the phone and together we still couldn't get there.  We found a way around, by going to "Forms".  But it is not working like you described.  Any other ideas?
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Employee Tax Expert

Can I deduct previous points/fees on the loan for my Rental Property?

superdav, I'll be back to answer on Sat. 2/13. I'll list the steps I took to duplicate. If you listed in forms mode and stopped depreciating the original fees, your good to go.
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Level 3

Can I deduct previous points/fees on the loan for my Rental Property?

Thanks again PaulaM!  

That is exactly what I did several times on both Premier and Home and Business (I upgraded thinking that might be the issue).  it doesn't want to go here..."Continue to next page and select radio button Transfer these fees for me to Other Expenses.".....  Even when I had the TurboTax guy (on the phone , accessing my screen).  We finally just bypassed the Interview and input it straight to the forms.  He couldn't understand why either.  The same thing happened to my purchase of a dishwasher which is under the $2500 safe harbor election, it placed it as an asset, as well, even though I told it that I want to take the full expense option.....so while am confident that  I have it correct on the forms now, it won't work in the interview process.

I tried to make a scenario on the "Online Version" of Home and Business, and it worked exactly as you showed.  Which is why I upgraded.

This has definitely been frustrating and a head scratcher.....

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Employee Tax Expert

Can I deduct previous points/fees on the loan for my Rental Property?

ahh, I'm sorry for the frustration, but glad it's on the correct form.
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