turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

can i deduct refinance closing cost (via depreciation) on a rental if it wasn't a rental when i refinanced it

It was my primary home at the time i refinanced, I rented it a few years later. Can i deduct those refi closing costs now? if so, how to enter this in TT

Connect with an expert
x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

4 Replies

can i deduct refinance closing cost (via depreciation) on a rental if it wasn't a rental when i refinanced it

bump

Vanessa A
Expert Alumni

can i deduct refinance closing cost (via depreciation) on a rental if it wasn't a rental when i refinanced it

No. You can not go back and deduct fees that when you took them out were personal mortgage fees.  Refinance closing costs are not deductible for a personal return. 

 

Mortgage Refinance Costs

What can I deduct when refinancing rental property?

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

can i deduct refinance closing cost (via depreciation) on a rental if it wasn't a rental when i refinanced it

Is your answer based on the content from the links you shared? Neither link covers the situation I described and I got a different answer from a CPA. Not sure who's right here.

Vanessa A
Expert Alumni

can i deduct refinance closing cost (via depreciation) on a rental if it wasn't a rental when i refinanced it

Actually, my answer is based on a variety of things including what is in those links.  It is about timing.  One is the fact that expenses you deduct begin at the date the property is converted to a rental.  For instance, depreciation begins when you convert the property to rental use, not when you move into your home.  So even if you lived in your home 10 years and then in 2023 you convert it to a rental, the depreciation starts in 2023, not in 2013 when you initially purchased and moved into the home. The 10 years you lived in your home don't exist when it comes to calculating depreciation or expenses. 

 

Similarly, you cannot go back and deduct maintenance expenses or anything else that would be a deductible rental expense now that you did prior to the conversion.

 

When you refinanced the home, it was for personal use, it was not rental use.  So the refinance was a personal expense not a rental expense.  Now, the interest payments you make now, would be considered rental expenses.  However, if you used the house for half rental and half personal use, you would only be allowed to deduct half the mortgage interest as a rental expense.  Because only half the expense would be related to a rental.  The rest would be personal use.

 

Although your specific situation is not addressed even in  Pub 527, the principal is basically expenses incurred while it is a rental property are deductible. Expenses incurred prior to the conversion are not deductible (other than your cost basis of the house). The proceeds of the loan were NOT related to any rental activity at the time they were taken out.  They were for personal use, therefore they would not deductible.  

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question
Manage cookies