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zmminvest
New Member

How to write off old closing costs after a refi for rental property?

I have a rental property and was amortizing the closing costs from the original home purchase.  Now I have refinanced the property and I am going to amortize the new closing costs associated with the refi.  However, how do I take the expense in Turbo Tax for original house purchase closing costs associated with the old loan?

5 Replies
pattif12
Expert Alumni

How to write off old closing costs after a refi for rental property?

To remove and list prior amortization as an expense. 

 

Go to Your Property Assets page- Along with your rental, you should see your original 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.
  • 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. 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, but it will not be listed there in the next year

 

 Add your  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.

Carl
Level 15

How to write off old closing costs after a refi for rental property?

How your previously amortizing closing costs are treated, depends on the source of the refi loan.

If you refi'd through the same lender, then whatever you have left to amortize on the old loan, gets added to the amortized costs of the new loan and that new total is amortized over the life of the loan. (Or is it 15 years? I'm honestly not sure on the time frame.)

If you refi-d through a new lender, then the remaining costs to be amortized on the old loan are fully deductible in the year of the refi.

 

zmminvest
New Member

How to write off old closing costs after a refi for rental property?

Pattif12:

 

So I am using TurboTax Business 2020 since I am filing for an LLC.  I don't see the same screen and options you describe. 

 

What I have done is went to the Federal Taxes>Rental Real Estate>clicked edit on the property in question>clicked "Update" on the "Dispose of Rental Real Estate Property" section at the bottom.  Clicked "Edit" on the asset to dispose of.   Now it gave me choices of (1) sold (2) given away or (3) abandoned.  I chose abandoned...I mean I would have preferred a "retired" option but without that option I thought abandoned was the better choice of the three options.  It asks for the date of abandonment and then proceeds to calculate a partial year's amort.  Which is fine.  But what it doesn't do is take the remaining asset value to other expense on my income statement so I manually did that through the "General Expense" section and entered a line for the write off of the closing costs.

 

Does this sound OK?

zmminvest
New Member

How to write off old closing costs after a refi for rental property?

Carl:

 

So I did two refis.  One with same lender, and one with new lender.

 

For the one with the same lender I'm not sure how to "move" the remaining asset value of the old closing costs to the new one without messing with the old asset , which turbo tax doesn't seem to want me to do.  So I guess I will just lave the old closing costs amortizing on its original schedule..  It's only < 2 years difference.

 

Do you know where in the IRS code does it state you have to carry the original closing costs if you refi with the same lender for a rental property?

 

Thanks!

Carl
Level 15

How to write off old closing costs after a refi for rental property?

See IRS Publication 936 at https://www.irs.gov/pub/irs-pdf/p936.pdf

Page 8 first column

Mortgage ending early.If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. However, if you re-finance the mortgage with the same lender, you can't deduct any remaining balance of spread points. Instead, deduct the remaining balance over the term of the new loan.A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event.

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