How to enter closing cost deductions for rental property

Forum|Forum|5 years ago
June 20, 2020
3 replies
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I purchased a rental in April, In Property Proflle, I was able enter info. this created the Asses/Depreciation of property.
Where do I enter the Expense for Closing cost?

TurboTax Self Employed Online

RobertG

Settlement fees and closing costs for buying the property become additions to your basis in the property. These include abstract fees, charges for installing utility services, legal fees, recording fees, surveys, transfer taxes, title insurance, and any amounts the seller owes that you agree to pay (back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions).

Costs that are basis adjustments can be part of your yearly depreciation deduction for the rental property.

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george123123

There is no place to enter points in turbotax.

ToddL99

"Points" are entered in the Assets/Depreciation interview of Rental Properties and Royalties, and amortized over the term of the mortgage.

See the following screen shots for aid in navigating;

Carl11_2

Employee

There are two types of closing costs associated with rental property, and from my experience, the program is effective on dealing with only one type on a consistent basis.

- Coats associated with acquisition of the property are added to the cost basis of the property. An example of this would be the title transfer fees paid at the courthouse to remove the seller's name from the deed and replace it with the buyer's name. The program seems to handle these just fine, *IF* entered correctly in the program.

- Cost associated with acquisition of the loan are amortized and deducted over the life of the loan. An example would be points paid at the closing, as well as the property survey fee if the lender required a survey as a condition of the loan. If the program does not enter these costs correctly in the assets/depreciation section, (it usually doesn't in my experience) then you will have to enter those amortized costs manually.

Here's how to enter the points in the Assets/Depreciation section.. (does not apply to entering the property itself, or any other property assets.)
- Select the Add and Asset button. (go straight to the asset summary if presented that option)
- Select Intangibles/Other Property, then continue.
- Select Amortizable Intangibles, then continue.
- Describe it as something like "2020 Financing Fees". Then enter the amount, and the closing date of the loan. Then continue.
- Select "purchased new", then "100% business use", enter the closing date of the loan (again), then continue.
- Code section is 163:Loan Fees, then continue.
- Useful Life in Years is the length of the loan, then continue.
- You can "show details" if you like. Then continue, and that does it

rynlee

What about other costs paid at besides points - such as appraisal fee, HOA fees, insurance premiums, processing fees, property taxes, title-related fees, transaction fees, underwriting fees, etc. Can these also be added as an intangible asset?

Critter-3

ALL closing costs that are not deductible anywhere else on the return are simply added to the cost basis of the property even if the program doesn't list every single individual possibility. Please be smarter then the dumbed down program.

Carl11_2

Employee

The basics for closing costs:

- Costs associated with acquisition of the property are capitalized and depreciated; meaning they are added to the cost basis of the property. An example would be transfer fees paid at the courthouse to remove the seller's name from the deed and replace it with the buyer's name.

- Cost associated with acquisition of the loan are amortized and deducted (not depreciated) over the life of the loan. An example would include loan application fees paid to the lender. These costs should be entered as a physically separate asset in the assets/depreciation section as "other" asset and identified as loan fees. If I recall correctly, you select the one for SEC163 Loan Fees, or something like that.

When you sell a property, any remaining fees to be deducted are fully deductible in the year of sale.

If you refinance the property, how remaining loan fees are dealt with depends on weather you refinance with the same lender, or a new lender.