Basically:
- costs associated with the acquisition of the property are added to the cost basis of the property, which gets capitalized and depreciated over time.
- costs associated with the acquisition of the loan are amortized (not capitalized) and deducted (not depreciated) over the life of the loan.
The most common question on this subject is how to enter amortized costs in the program. Here's how.
- In the Assets/Depreciation section select YES to indicate you have property that can be depreciated, then continue.
- Select NO and continue.
- Select Intangibles/Other Property and continue.
- Select Amortizable Intangibles and continue.
- Enter the description, cost, and date (usually date of closing for those things associated with the loan) and continue.
- Select purchased new, used 100% for business, and the date of the closing or one day after, then continue.
- Code section will be 163-loan fees, then continue.
- Useful life in years will be the same as the loan term. Commonly a 15 or 30 year loan. Then continue.
- Finish working it through, and you're done.
