When I refinanced my rental property, I entered all the refinance closing costs into Turbo Tax. Where can I find what Turbo tax did with that information?

[tax-me-senseless]

I don't see what TT did with the closing costs I entered. Are they being amortized as an expense or depreciated?

[Carl]

Cost associated with acquisition of the property are added to the cost basis of the property and depreciated over time. With a refinance, you don't have any of these costs.

Cost associated with acquisition of the loan are amortized and deducted over the life of the loan.  These are the only costs you should have.

Take a look in the Assets/Depreciation section and you should see an entry there for those amortized costs. If those costs are not there, here's how to enter them manually.

- Select the Add and Asset button. (go straight to the asset summary if presented that option)
- Select Intangibles/Other Property, then continue.
- Select Amortizable Intangibles, then continue.
- Describe it as something like "2021 Financing Fees".  Then enter the amount, and the closing date of the loan. Then continue.
- Select "purchased new", then "100% business use", enter the closing date of the loan (again), then continue.
- Code section is 163:Loan Fees, then continue.
- Useful LIfe in Years is the length of the loan, then continue.
- You can "show details" if you like. Then continue, and that does it

Now, if you refinanced with the same lender, then you can not deduct any remaining amount to be amortized on the old loan. You have to add the remaining amount to the refi fees of the new loan, and that new total gets amortized/deducted over the life of the new loan.

If you refinanced with a different lender, then any remaining amount to be deducted on the old loan are fully deductible in the year of the refi. Here's how that's done, assuming it was entered correctly when you initially purchased the property all those years ago.

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...."

[tax-me-senseless]

Thanks Carl. These are great answers and very helpful. The amortized points I had amortized from my previous or original loan were closed and I did see them added under a miscellaneous expense as a "unrealized refinancing fee." Perfect! However, I am still uncertain about where Turbo Tax is entering the new closing cost fees for my refinance. The program asked if I refinanced and I entered all the costs in the appropriate areas, but I do not see a new asset/depreciation started. You explained how I can manually add that in under a new asset/depreciation, but I then worry that the software will enter one in later and now it records two new assets (my refinancing fees) to amortize. Any advice on what I should do? Thanks!

[RobertB4444]

As @Carl said, you should look on the form and see if there is an entry for the new amortization you created.  If your new entry isn't there then you should follow the instructions above to create the entry.  It should be there though.

Pay for your return.  Then before you file you will have an opportunity to review your return.  If the entry isn't there at that point it's not going to be so you should go back and make it.

[Carl]

However, I am still uncertain about where Turbo Tax is entering the new closing cost fees for my refinance.

Since this is a refinance, there are no closing costs associated with acquisition of the property. Not a single penny. So there's nothing from those costs to add to the cost basis.

The program "should" have set up your closing costs associated with acquisition of the loan as an amortized asset in the assets/depreciation section. At least, that's what I would expect. But for unknown reasons that doesn't seem to always happen. I can only guess those entries go to la-la land.  That's why I provided guidance on entering amortized loan costs manually.

Now if you want, you can print out everything once the return is completed in it's entirety so you can see all the calculation forms and worksheets, and then "follow the money" from there. I myself am not willing to do all that on my end for numerous reasons, including the fact that I don't have a refi of any of my rental properties for quite a number of years now.

[tax-me-senseless]

Hello, my question is related to the rental property asset of mortgage points I paid when I originally purchased my rental properties a few years ago. I refinanced my property in 2021, so I closed that asset and the software transferred the rest of the money I paid as points to a rental expense. That all makes sense to me and you showed me how to do that on TT.  The amount is $3,364. However, I am now working on my PA state return and the program is treating this sale like a loss.  But here is my question.  It is asking for me to enter the "price less expenses" for this asset and I am not sure what to enter. Is the "price less expenses" the original amount of the points I paid? Also, why is the software treating this rental asset as part of my gains and losses anyway on my state return? It lists this loss in the same area where I have capital gains on the sale of a mutual fund.  This asset was part of my rental property, not my personal income. I am confused. Your help is appreciated. 

[Carl]

I am now working on my PA state return and the program is treating this sale like a loss.

Sorry, but I can't help with a state return. I'm in FL and my state does not tax personal income. Hopefully, someone familiar with PA state taxes will jump in here to assist.

[2313hatetaxes]

I have the original loan fees being divided between the amortization of the loan (origination fees and appraisal fees) and the other fees ie legal and title fees are depreciating with the cost basis of 27.5 years.  When refinancing, what happens to these original fees/costs?   You mentioned the previous fees are fully deductible when you refi with a different lender.  Are these the origination fees and appraisal fees?   

What about the new loan fees for title and attorney, etc -- where do they go?  Are they amortized over the life of the loan or added to the cost basis?