Solved: When I sell a rental property, can I accelerate refinancing fees and improvement depreciation, like a new roof? Do those go under depreciation?
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New Member

When I sell a rental property, can I accelerate refinancing fees and improvement depreciation, like a new roof? Do those go under depreciation?

Purchased a property in 2013, replaced the roof in 2014, refinanced in 2014, sold it in 2017.  I have two major items of depreciation, the refinancing fees and the remainder of the roof, that I have not claimed.  Can I accelerate those depreciations since it was sold?  Do I just put the remainder in the depreciation section?  Turbotax only seems to be claiming 1 years worth of depreciation of these fees, despite me telling it the property has been sold.

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New Member

When I sell a rental property, can I accelerate refinancing fees and improvement depreciation, like a new roof? Do those go under depreciation?

No. Three factors determine how much depreciation you can claim each year:

  1. Your basis in the property
  2. The recovery period for the property
  3. The depreciation method used

In your case, the roof would depreciate at the same recovery period as the roof before it was replaced. But for other items such as carpets being installed could depreciate at a recovery period of 5 years or 9 years depending on the depreciation system used. For more information please IRS Publication 527

The refinancing fees will be subject to an amortization of 30 years. Please see our FAQ (below) on refinancing rental property https://ttlc.intuit.com/replies/3301761



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7 Replies
New Member

When I sell a rental property, can I accelerate refinancing fees and improvement depreciation, like a new roof? Do those go under depreciation?

No. Three factors determine how much depreciation you can claim each year:

  1. Your basis in the property
  2. The recovery period for the property
  3. The depreciation method used

In your case, the roof would depreciate at the same recovery period as the roof before it was replaced. But for other items such as carpets being installed could depreciate at a recovery period of 5 years or 9 years depending on the depreciation system used. For more information please IRS Publication 527

The refinancing fees will be subject to an amortization of 30 years. Please see our FAQ (below) on refinancing rental property https://ttlc.intuit.com/replies/3301761



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New Member

When I sell a rental property, can I accelerate refinancing fees and improvement depreciation, like a new roof? Do those go under depreciation?

So I simply lose all of this depreciation?  I came across this message: <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/3642507-we-put-a-new-roof-and-gutters-on-our-rental-property-in-20...>
It seems to intimate that I can recapture the rest of this roof improvement upon sale if the depreciation is not completed.  Is this not the case?  Is there no mechanism for recapturing the refinance fees?
New Member

When I sell a rental property, can I accelerate refinancing fees and improvement depreciation, like a new roof? Do those go under depreciation?

There is no loss on depreciation per se, but upon selling the property the improvements you made will increase your basis. The allowed depreciation would be considered unrecaptured 1250 gain if sold more than the adjusted basis. To illustrate, If a property was initially purchased for $100,000, and the owner claims a depreciation of $10,000, the basis for the property is considered to be $90,000. If the property is subsequently sold for $180,000, the owner has received an overall gain of $90,000 over the basis value. Since the property has sold for more than the basis that had been adjusted for depreciation, the initial gains are recaptured based on the original purchase price of $100,000. This makes the first $10,000 of the profit subject to the unrecaptured section 1250 gain, while the remaining $80,000 is considered regular long-term capital gains. With that result, $10,000 would be subject to the higher capital gains tax rate of up to 25%. The remaining $80,000 would be taxed at the long-term capital gains rate of 15%.
New Member

When I sell a rental property, can I accelerate refinancing fees and improvement depreciation, like a new roof? Do those go under depreciation?

OK, so in the same example, the owner replaces his roof, it costs 10k.  He has depreciated that roof by 6k.  How are the taxes handled then?  Also, I don't know if you are specifically not commenting on it, but it seems from your comments all refinancing fees  that I have not amortized are simply lost?
New Member

When I sell a rental property, can I accelerate refinancing fees and improvement depreciation, like a new roof? Do those go under depreciation?

The cost basis would increase by 10k with the improvement resulting in 110k. The 6k of depreciation would then decrease basis resulting in 104k. When sold at 180k there is a gain of 76k. The 6k would be considered unrecaptured 1250 gain subject to the higher capital gains tax rate of up to 25%. As for the refinancing fees, any amount not amortized will be added back into your cost basis, reducing your gain when you sold the property.
New Member

When I sell a rental property, can I accelerate refinancing fees and improvement depreciation, like a new roof? Do those go under depreciation?

Thanks, that was what I was looking for.
New Member

When I sell a rental property, can I accelerate refinancing fees and improvement depreciation, like a new roof? Do those go under depreciation?

What about refinance fee in this case? What should I do with the remanning refinance fee that I paid at the time of refinance, but has NOT been claimed (through annual amortization) at the time of sale?
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