How do I expense the remaining amortization of loan fees (points) on a rental property (Schedule E)?

[MikeyVan1980]

Thank you for the clarification.  How about section 179(washer and dryer) , is it recaptured differently than if I depredicated on a yearly basis? 

[Carl]

First note that "residential" rental real estate assets do not qualify for SEC179. But they do qualify for the SDA (Special Depreciation Allowance).  So perhaps you just stated "SEC 179" without realizing it.

Not really "differently" per-se. But it's recaptured. If you're reporting this sale in the SCH E section of the program, then the program takes care of all recapture for you.

If you're reporting the sale in the "Sale of Business Property" section, then (I think) the program will ask you for total SDA deductions separately, as well as separately ask for SEC 179 (where I would expect you to enter zero) because non-passive assets would qualify for the SEC179 deduction.

[MikeyVan1980]

Unfortunately, the preparer that did my return in 2018 did take the washer and dryer as a section 179 instead of the bonus depreciation.  Do you suggest the 2018 return be amended to correct the depreciation? I have recently seperated from the military and had two rentals that I sold in 2020 so Im trying to determine if I should get 2018 correct before attempting 2020s return.  Thank you! 

[Carl]

If you sold the property in 2020, then I'd just leave it alone. You have to recapture the depreciation anyway on the 2020 return, regardless of if it's SEC179 or SDA.

[Aspirin756]

@view2 Thank you, I have now read several different solutions to this problem and I believe the one you describe is the best one.  The tricky part is that there seems to be no way to trigger this behavior (copying the unamortized balance to Schd E line 19, Other expenses) from Forms mode. I would never have found it under "Special Handling Required" in the interview without your comment and someone else's a  year later.

[Kamlau12]

That works for federal return, i got it to show up on my F1040 as "unrealized refinance fees" as Other Expense.  How about for California state return?  It currently backing out the unrealized amount as an adjustment from Other gains/losses.  Is California state not allowing the unrealized refinance fees write-off? 

[Carl]

I can't help with state returns. However, I do know that things from the federal return are imported into the state return when you first start that state return. So if you make a change on the federal return after you have already started the state return, your change will not be reflected on the state return. You would have to clear the state return and start over that state return, in order for changes on the federal side to be imported.

[fynny]

I'm using TurboTax Business Edition to prepare my LLC partnership return for Year 2021, and have two cases involving residential real estate rental properties both of which need to  claim remaining amortization: 1) early payoff of a mortgage 2) sale of a mortgaged property.  I would expect that the steps needed for each of these cases would be the same.  What I'm not seeing with this newest version of TurboTax Business Edition are the prompts/screen for Special Handling to which you refer.  After reading all of the discussion items, I'm left wondering why it  wouldn't be best for me to just add a Miscellaneous Expense item under General Expenses of my own making that calls out "Remaining amortization due to mortgage payoff" or "Remaining amortization due to sale of mortgaged property" with the corresponding amount of  remaining amortization, rather than trying to figure out how to get TurboTax to do this.  (In my case, the most frustrating thing and point of confusion is just knowing what TurboTax Business is supposed to be doing, and whether it is working or not, ie. where is remaining amortization supposed to show up and how to get TurboTax to do this... once I understood that TurboTax wasn't automatically handling this, and that all I needed to do was to an additional miscellaneous expense line to capture the cost, then adding the additional miscellaneous expense line manually is no biggy... if indeed my understanding is correct and that's all there is to it.)  

[Carl]

I'm just not familiar enough with TTX Business. But I would still expect to see an entry in the assets/depreciation section for amortized costs. When working it through, your method of disposition will "not" be that you sold the asset. Otherwise, you'll be forced to enter sales information, and you can't sell a deduction of course. I'm also wondering if that's something that's handled on the personal 1040 tax return passed through on some entry on the K-1. So might want to check that.

wouldn't be best for me to just add a Miscellaneous Expense item under General Expenses of my own making that calls out "Remaining amortization due to mortgage payoff"

I don't see a problem with that. Just make sure you show "some kind" of disposition of the item in the assets/depreciation section that does not involve selling it.

[Anonymous_]

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@fynny wrote:

I'm using TurboTax Business Edition to prepare my LLC partnership return for Year 2021, and have two cases involving residential real estate rental properties both of which need to  claim remaining amortization: 1) early payoff of a mortgage 2) sale of a mortgaged property.

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You can add another asset in the Rental Real Estate section and select Amortizable intangibles.

[Carl]

You can add another asset in the Rental Real Estate section and select Amortizable intangibles.

Probably to late for that now, since 2021 is the year of sale.

Its perfectly possible and most likely that the refi fees were incorrectly entered as a depreciated asset instead of an amortized asset. In that case, there is no option to deduct any remaining fees. You'll have to do it manually with an entry in miscellaneous expenses.

[Anonymous_]

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@Carl wrote:

You can add another asset in the Rental Real Estate section and select Amortizable intangibles.

Probably to late for that now, since 2021 is the year of sale.

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I can do that in the program now and then simply indicate that it was sold; a fairly simply process.

[Anonymous_]

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@Carl wrote:

Its perfectly possible and most likely that the refi fees were incorrectly entered as a depreciated asset instead of an amortized asset.

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That actually makes little difference as the two are virtually the same; amortization is used for intangible assets while depreciation is used for tangible assets.

[Carl]

the two are virtually the same

Not really. Depreciation has to be recaptured in the tax year of the sale, whereas amortization is a permanent and forever deduction.

[Anonymous_]

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@Carl wrote:

Not really. Depreciation has to be recaptured in the tax year of the sale, whereas amortization is a permanent and forever deduction.

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Yes, really - see Section 1245.

Regardless, in this instance, it would make no difference for the purposes of entering the figures into the program.