How do I deduct previous points/fees from a 2013 refinance on the loan for my Rental Property when I refinanced in 2020?

[Goldenage]

Hello,

I have a rental property that had points paid when I refinanced in 2013 which are being depreciated in Turbotax the last several years. I recently refinanced again in 2020 and both are still showing up in depreciation. 

I understand that difference between what was already depreciated from 2013 ($336) vs the total points ($1521) is what I am trying to now show as an "other expense" per the instruction in Turbo tax.

When I choose the button for "I refinanced the mortgage on this property, lets review," it give me a chance to enter the new mortgage info which I have done. I then get a button for "I have prior finance fees, let's take care of this now" and when I click continue it takes me to a screen asking for misc expenses. I continue past that and it takes me back to the main Rental Summary.

What am I missing as something isn't working correctly with what should be an interview that would ask me questions, I answer them, and then voila... the balance to be depreciated in the system for my old loans (to a new bank) becomes an expense and the new loan is what is depreciated the next 30 years.

Please help.

Thanks

[willcoxboy76]

Goldenage,

Use form 4797.  Make sure the number inputted on line 7 is negative.  Use control D to override smart sheet.  This negative amount will be transferred to schedule 1 line 4.  In my case had refinance fees of $1,895,  I had taken prior depreciation of 798.  So my loss is -$1,097.00.  

[Carl]

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...."

[DianeW777]

It depends. If you refinanced with a new lender (different than the original lender of the first refinanced loan) then you should enter the balance of the refinance fees from that loan as a miscellaneous expense on your rental property.

The new refinanced loan will be added as a new amortizable asset for the life of the new loan.

Summary:

When a mortgage loan is refinanced and it is with a different lender, then any remaining points that have not been deducted under the first lender can be deducted in the year of refinance.

If a mortgage loan is refinanced with the same lender, any remaining points must be added to the points on the new loan if applicable, then divided by the loan term to determine the monthly amount you can deduct.  If there is a full year of mortgage payments then it would be 12 months deduction as points. For the first year it would be the number of months remaining in the year beginning with the first month payments begin and ending in December of that year.  

Based on your situation continue to follow the instructions provided by Tax Champ @Carl.

@Goldenage