Finance Fees

[bmerritt30]

I refinanced my mortgage on my rental property.  I'm trying to write off the portion of financing fees after the depreciation.  TurboTax wants me to enter a gross sales price for this asset.  It will not allow me to file by putting in 0.  Do I need to do something different?

[ColeenD3]

Where are you trying t enter this? It is an expense on your Schedule E. Are you also selling the property?

Unlike your primary residence, where you can only deduct qualified points and interest, you can deduct all costs associated with obtaining a new mortgage for your rental property. Typical loan-related expenses include:

• Points
• Loan origination and loan assumption fees
• Mortgage insurance premiums
• Application fees
• Credit report fees
• Appraisal fees (if required by the lender)

The costs associated with obtaining a mortgage on rental property are amortized (spread out) over the life of the loan. For example, if it cost you $3,000 to refinance your 30-year mortgage, you'd be able to deduct $100 per year for the next 30 years.

Other refinance-related expenses not directly related to the mortgage may also be deductible. Generally, if the cost is associated with operating the property (like real estate taxes or hazard insurance) they're deducted as expenses, whereas costs associated with purchasing the property (like title search fees or recording fees) are added to the property's cost basis, which means they get depreciated.

When you enter your rental property information, we'll ask about all of these things and deduct them according to the rules

[bmerritt30]

I'm entering this on section 1245 on an LLC return.  I'm trying to dispose of the asset and expense the amount that was not depreciated.

[ColeenD3]

It is not section 1245 property. Include it as a sales expense.  LINK

[Carl]

I'm trying to dispose of the asset and expense the amount that was not depreciated.

Your amortized costs are not depreciated. They're deducted over the life of the loan. So you're trying to go ahead and finish deducting the cost of the old loan. Here's how to do it.

Under the "Rental Real Estate Assets (Depreciation)" section, there's another section called "Disposal of Rental Real Estate Property". Elect to start/update that.

Elect to EDIT the asset that represents your finance fees on the "OLD" loan.

Indicate that you sold it, and continue.

For the date you "sold" those finance fees, enter the closing date of your new refi loan.

Enter the TOTAL AMOUNT of your financing fees for the old loan in "BOTH" boxes, and continue.

Now the loss amount shown is the remaining fees to be deducted, and they will all be deducted from 2019 income on the 1065 return.