Mortgage closing costs rolled included in loan are not depreciated, correct?

Forum|Forum|3 years ago
December 22, 2022
4 replies
29 views

A rental property mortgage was refinanced and the closing costs were rolled into the new loan. So the taxpayer paid nothing at closing but their monthly mortgage payments are higher. Those closing costs will be deducted as mortgage interest when paid and not added to the basis of the rental property, correct?

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Best answer by IRonMaN

They are part of the new loan ------ technically they are paid.

IRonMaN

Level 15

They are intangible costs that will be amortized over the life of the loan

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D

DENNYCARRAuthor

Level 4

even though the costs haven't technically been paid yet? I'm sorry, I'm spacing right now.....

IRonMaNAnswer

Level 15

They are part of the new loan ------ technically they are paid.

Slava Ukraini!

abctax55

Level 15

Jeff has it correct (of course :-). Your client 'borrowed' the money to 'pay' the closing costs.....it's just that the transaction was only on paper, no actual exchange of cash. Look at those costs carefully to make sure there aren't any prorations that might be immediately deductible (property taxes & insurance come to mind) and that none of them are actually impounded items (again, property taxes & insurance come to mind).

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