Over $5000 refinance cost only result in $100 reduction in tax due?

[tianwaifeixian]

I did a refinance on my rental property, total cost I entered is over $5000, but when I moved to the next step, I only see about $100 deduction on my tax due amount. Did I do anything wrong?

After I moved to the next step, I see this:

It looks like the full amount will be deducted over time.  Here are my two questions:

1. Anyway it can be fully deducted in one year?

2. Now should I include the original loan (when I purchase the house 3 years ago) here as the "prior refinance fee"? I am assuming the cost of that loan is also deducted over the life of that loan?

Thank you!

[ThomasM125]

There is no way you can deduct the refinance fees in one year, as they apply to the life of the loan.

No, the original loan is not deductible as a prior refinance fee, just the remaining, unamortized balance of finance fees that you amortized on the original loan would be entered as the prior refinance fee. 

[tianwaifeixian]

Thanks. That is what I thought as well. To make sure I understand what you said: say, 3 years ago, I paid $4500 for the original loan when I purchased the house. $300 is being deducted since that year. I can claim $4500-$300*3=$3600 as the previous refinance fee this year. Is that correct? 

And, based on this year's comments that I saw on TT, it says it will keep track of this. I am assuming TT will automatically show the amount? But when I clicked "I have prior refinance fees let's take care of now" option, it didn't give me a number. Instead, it ask me to enter the info. How can I find out how much I should enter here?

Thank you!

[Vanessa A]

Yes, that is correct.  If you had an original finance cost of $4,500 and you were deducting $300 per year for 3 years, then your remaining balance would be $3,600.  So, in this situation you would enter $3,600 for the prior finance fees. 

[tianwaifeixian]

Thank you! Do you know how to figure out how much has been deducted in the last 3 years in TT? Have no clue on how to find that number in TT

[ThomasM125 · Accepted solution]

The amortized finance costs would normally appear on line 19 of your schedule E and be called amortization expense. You may also see them on form 4562, depreciation schedule, on line 42 to 44.