Pre payment penalty on commercial loan for a rental property

[Qtax09]

I converted my home into a rental property. I took out a nonconforming commercial loan on it to buy another home in another state.

I have a 3 year prepayment penalty.  Is that penalty deductible if I sell the rental property  sooner?

[tagteam]

See https://www.irs.gov/publications/p936#en_US_2023_publink1000229919

[Qtax09]

Thank you.  But still do not understand how a rental property is treated with the loan prepay penalty.

[tagteam]

I'm going to page another member, @AmeliesUncle 

[tagteam]

Why a prepayment penalty would be treated differently for rental real estate than for a home loan doesn't make much sense.

[AmeliesUncle]

Could you clarify your situation?

You said you took out another loan, but then you are asking about a prepayment penalty (which seems to be about PAYING a loan, rather than receiving a new loan).  Could you expand on that; taking out a loan and prepaying it seem to be opposites.

Is the other home in the other state a rental?  Personal?  Something else?

What EXACTLY is the prepayment penalty for?  You need to look at the EXACT verbiage in your contract.