Question

I paid closing costs for a refinance of my rental property. How do I navigate to the correct location to enter the closing costs?

Forum|Forum|4 years ago
May 9, 2021
2 replies
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Is there a way to navigate to the screen or have Turbotax walk me through questions?

TurboTax Self Employed Online

There is no single location to enter "closing costs" for a refinance of a rental property - where they are entered depends on what the closing costs are.

Some costs listed on a closing statement ("closing costs") may be deductible in the current year (e.g. prepaid interest and real estate taxes), some must be capitalized and amortized over time (e.g. points) and others added to the cost basis of the property (e.g. like title search fees or recording fees) and depreciated.

These "costs" are entered in their appropriate sections of the Rental Properties and Royalties interview of TurboTax Self-Employed (or desktop Home & Business).

See What can I deduct when refinancing rental property?

A

Achievement Engineering

This is about the refinance of a commercial rental property. I know how to enter the loan fees (such as loan origination fees, appraisal fees) to be amortized over the the life of the loan. But I am confused still about how to add the closing costs (such as recording fees, escrow fees, ALTA loan policy fees - fees that we pay to the title company), to the cost basis of the property. Since this is a refinance, there is already a cost basis history from the first year the property was acquired. Meanwhile, that basis is being depreciated, how do I add to that basis? The refinance is with a different lender. Do I expense any remaining closing costs from the original lender, and then add the new closing costs to the basis and start depreciating, how many years? I don't see where Turbo Tax is asking me these questions. I am using TurboTax Business for Partnerships, Corporations, LLCs. Please help.

PatriciaV

Employee

Yes, the closing costs for a refinance are added to the cost basis for the property. You may report this total as another asset for amortization under Rental Real Estate Assets. Choose Rental Real Estate for the type of asset, then "Amortizable Intangible" on the page titled "Tell Us a Little More." (Mortgage refinance costs are listed in the examples for this type of asset.) The Code section is 163: Loan fees, refinance costs. The amortization period would be the term of the loan (default is 15 years).

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Carl11_2

Employee

Expenses related to acquisition of the property are added to the cost basis of the property. An example would be the title fees paid at the courthouse to remove the seller's name from the deed and replace it with the buyer's name. Since this is a refinance, you don't have any of these expenses.

Expenses related to acquisition of the loan are amortized and deducted over the life of the loan. An example of this would include origination fees or points paid on the loan. Would also include the cost of a property survey if the lender required it as a condition of approving the loan. Expenses for this are entered in the assets/depreciation section as an amortized (not capitalized) expense and deducted (not depreciated) over the life of the loan. Typically, that would be a 15 year or 30 year loan.

ENTERING POINTS

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