Refinancing Rental Property

[Clifton Coffman]

Pub 527 States ’Expenses paid to obtain a mortgage. Certain expenses you pay to obtain a mortgage on your rental property can’t 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.”

When these fees have already been paid one time the basis has increased. Why should be basis increase after refinancing? What do you do? Would you expense all closing costs of the refinance or the initial purchase for the tax year?