How do I enter refinance expenses for a rental property?

[TaxDebbie]

My client refinanced a rental house.  How do i enter the $5214.00 refinance expenses?  The client has owned the property for 35 years and it is completely depreciated.

[rbynaker]

Not sure this passes my sniff test.  How are the loan proceeds spent?

It's not unheard of to still have a mortgage after 35 years but I would be sure you have documentation on what the loan proceeds were spent on.  It's fine if it's just a straight refinance (i.e. to get a better rate) but my chronic refinancers tend to do things like pay off car loans, credit cards, etc.

Rick

[garman22]

Good point man.....i thought that after I answered but, I figured the preparer should know better.  

[TaxDebbie]

In this case I had asked about the use of the mortgage funds but I very much appreciate the heads up concern.  Please do not assume that we who ask questions are as experienced as those who are able to help us.  I thank you for all information and concern.

[garman22]

No worries @TaxDebbie

[garman22 · Accepted solution]

Under asset worksheet you will amortize using IRC code 446 for Loan Fees.

[TaxDebbie]

On the asset entry sheet use code "O", go to the bottom of the page and change the depreciation type from MACRS to Amort, use the life of the loan for the recovery period.

[BobrLC]

How about if the rental property is not completely depreciated out, only 4 years in service.

[abctax55]

"...How about if the rental property is not completely depreciated out, only 4 years in service."

Not sure why you lined thru this....  but for future searchers.  The time is service for the property is COMPLETELY unrelated to how refinance costs are handled. 

[BobrLC]

Don't know how line through text happened but not now.  Thanks