Ask the tax adviser
Deducting closing costs
Dear Tax Talk:
If we refinance a rental property loan, are the closing costs tax
deductible on Schedule E?
Closing costs paid on the refinancing of a rental property are tax
deductible on Schedule E. However, the costs have to be deducted
annually over the term of the new mortgage.
That means if you pay, for example, $1,500 in closing
costs on a 15-year mortgage, you can deduct $100 annually for closing
costs. If you pay off the loan early or refinance, you can deduct
the balance of the costs in that year. You may be better off paying
a higher interest rate in exchange for eliminating points on closing.
The same holds true for closing costs paid on the
refinancing of your home.
-- Posted: May 14, 2002