Purchase date of home. When did you buy the home with the loan from XYZ bank

[turtle123]

I refinanced last year, and that loan was sold to another bank, but neither of those loans was used to initially purchase the home.

Turbotax asks me:

When did you buy the home with the loan from XYZ bank

Purchase date of home: 

Question 1)

Does Purchase Date mean when I initially bought the home (in the very beginning) or when I refinanced the home?

Question 2)

Since the second loan was sold (transferred) from the first bank is the purchase date the same since it was not a refinance?

Thank you.

[Vanessa A]

Date of Purchase is the date you bought the home

If you did a cash out refinance and none of the loan that you refinanced was not used to buy, build or substantially improve the home that secures the loan, you cannot take any type of mortgage interest deduction for that loan. 

If you had a balance on your original home loan and you took cash out for something else, then only the interest on the portion of the loan that was used to buy, build or substantially improve your home can be deducted.

If you took cash out for any other purpose other than to build or improve your home, the interest on that portion of the loan is not tax deductible. 

Example, you refinanced your home for $200,000.  You took $50,000 out to buy a truck and $50,000 out to pay off credit card and other debt.  Your previous loan balance from buying the house was $75,000 and you are using $25,000 to remodel your kitchen.  The $75,000 is considered the amount used to purchase your home, the $25,000 is to improve your home so the interest on the $100,000 used to purchase and improve your home is tax deductible.  The interest on the $100,000 used to pay off debt and buy a truck is not deductible.  

TurboTax will do the calculations for prorating the interest, but you will need to enter the amount that was used to buy, build or improve your home. 

[bobi456]

Thank you for replying. Is date of purchase the original date the home was bought, years ago, or is date of purchase the most recent re-finance date with the bank in question?

[Vanessa A]

The day you bought the home years ago for the first time. 

[bobi456]

Great. Thank you!

[dice4107]

Reading the other replies is helpful, thank you!  I, however, bought the land which the home was built on with cash, then had a construction loan through IndyMac (yep one of those before it crashed and burned) for the build, which was then converted to a mortgage upon completion.  The loan was then turned over to another bank after the crash.  We refinanced in 2013.  The property is now a rental for the first time and I'm trying to file it as such.  What would the purchase date be?  The date of the land purchase, the completion of the construction loan, or what?  It's not technically either.  Same to be said for the purchase price (construction and loan was a lot lower than home value and equity at refi). Thanks so much for your help!

[AmyC]

1. I would use the date the home was finished and built. It was not actually a home prior to that point. Upon completion, it was switched to a mortgage so that seems like a good beginning point. You can show the mortgage on the home and the date, easy paperwork and proof.

2. When you put a home into rental use, you depreciate it based on the lower of your basis or Fair Market Value.

References:

Real Estate Tax Center| IRS

Rental Real Estate and Taxes| Turbo Tax    

[dice4107]

Thank you so much!  I do not have a 1098 for that original mortgage.  I have the one after it was transferred, should I use that for the info?  I cannot contact the bank/mortgage co/title as it was all in one and they aren't in business anymore (IndyMac).  I really appreciate your help.

[DMarkM1]

The form 1098 is not source document for the cost basis.  Your actual purchase documents for the property will have the cost (purchase price of the land and the improvements).  The loan amount doesn't necessarily show the purchase price; it only has the amount you had to borrow (which is only part of the cost).