Re-fi on rental property

[imjulier]

Wow-it already feels late in the tax season. Client re-fi's a rental property. If I recall correctly, the expenses associated with re-fi can be claimed in the current year but points are amortized. Sound right?

Thanks,

Julie

[Richcpaman]

No, not at all...

That would be a personal residence, But not a rental property. They would be added to basis.

And if they took any cash out, and did not put it into the property, that portion of interest expense would be non-deductible on the rental property.

Rich

[joanmcq]

I disagree. Expenses and points are amortized over the life of the loan. Expenses can't be amortized on a personal property and points are amortized over the life of the loan. He's right about any cash pulled (unless the cash was used to renovate/repair the rental).

[jainen]

>>Expenses and points are amortized over the life of the loan.<<

This is a common treatment, but wrong. Pub 527 explains, "Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property."