Question

Property converted to rental, refinance costs prior to conversion

Forum|Forum|2 years ago
December 31, 2023
2 replies
0 views

I’m filing amended tax returns for my rental property and would like to resolve this. I’ve been looking for a while, but I can’t seem to find an answer.

Here’s the situation and associated timeline:

2017: property bought as primary residence (no points)

2020: mortgage refinanced to lower rate (no points, no cash out)

Early 2021: mortgage refinanced again to lower rate (no points, no cash out)

Mid 2021: property converted to rental

For taxes, I already did the following:

- For 2017, 2020 and 2021 deduct any mortgage interest in the year it was paid

- For rental, add 2017 property acquisition cost to the basis of the property for depreciation

- For rental, amortize 2017 loan acquisition cost over the duration of the loan

But I don’t know what to do with the rest of the refinance costs (title fees, legal fees, recording fees, survey fees .. etc). MY QUESTIONS: can these refinance costs also be amortized for the rental (similar to the loan acquisition cost of the original mortgage) even though refinance happened before the property was converted to rental? If yes, can I amortize the cost of both 2020 and 2021 refinances, or just the latest one?

I’m not asking about the mechanics of doing this on TT, but the actual IRS rules and what’s allowed.

Thanks.

A

Anonymous_

Employee

https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-credits-deductions/deduct-refinancing-rental-property/L1SVq1LVu_US_en_US

R

RobertB4444

No. Refinance costs on your primary residence are not deductible as expenses. But they add to the basis of the property.

So, when you are converting your property to a rental then you can depreciate the basis of the property over 27.5 years. And that basis can include those refinance costs.

@dreamWeaver99

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