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Where do I enter refinance information for a rental property?

Chris

I have deducted mortgage re-financing fees on my rental property since 2013. Previously I used Tax Act. I tried entering these fees as a depreciable asset but I cannot match the amount that Tax Act shows as the depreciation for 2023.

On TaxAct I was using SL(straight line), 30 years, Full Month, but on FreeTaxUSA I get errors about the Depreciable Life or MACRS is incorrect. It seems also that regarding MACRS, there is no Full Month option. I am stumped.

How can these 2 programs be so different about depreciation? Or better, am I entering this in the wrong area?

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Accepted answers

MatthewD

Hi,

When you need to depreciate/amortize loan costs, use the following.

Alternative Depreciation System (ADS)
30 Years or the life of the loan
Mid-month

When you look at your depreciation schedule, please note that the ADS is actually Straight Line (SL) and should be the same as the other company.

All comments

MatthewD

Hi,

When you need to depreciate/amortize loan costs, use the following.

Alternative Depreciation System (ADS)
30 Years or the life of the loan
Mid-month

When you look at your depreciation schedule, please note that the ADS is actually Straight Line (SL) and should be the same as the other company.

Chris

Hello,

Thanks! I should have written 15 (life of loan) instead of 30, however, it works!

Do you happen to know if it matters what category I use Real Estate or Other?
If I use:
Other
Amortizable Asset (Which type best describes your Amortization)
Amortizable Asset Code Section- there is no code 163 (Financing Fees) but if I choose say 171, input the past amortization and life in years of amortization-I get the same result.

I am not sure if it matters. But thanks again. I did not know that ADS is SL!

MatthewD

Hi,

That would be the best option for loan refinancing fees, but we don't currently have the code. Sorry.

Honestly it does not matter though.

Chris

Hello,
Great, that's what I supposed. But thanks again, it's the correct amount, and that's what important.
I really appreciate it and now my I can go forward with FreeTaxUSA instead of TaxAct.

egluke

Hi, having what I think is a similar issue here - does it really not matter what code we use? Is there a way to manually change the code before submitting?

Would love guiding questions in future years around amortizable costs

MatthewD

Hi egluke,

We have a limited number of codes for amortization. Use a code that is as close to your needs as possible. For example, (178) Cost of Acquiring a Lease, would be a good option for refinance fees for a rental property.

Our FAQ says, "Amortization is really just depreciation for intangible assets...If you're sure this is an amortizable asset, then just choose the classification that is the closest fit."

egluke

Is there a way to request adding the 163 code for future tax years? Refinancing a mortgage is probably a very common issue and turbotax etc handle it much more cleanly (and even prompt you when filling it out).

TaxMorgan

Hello egluke,

We pass on customer requests from the community to our developers to see if they are something we can add for our future software to support. Posting in the community is a great way to request updates.