Refinance Depreciation items

[Jason Lam]

I work in finance and do my own taxes as its normally pretty straight forward. I did however just refinance an investment property to take advantage of the lower rates. I understand underwriting fees, title fees, recording fees, etc are all depreciated over the course of the loan while things like prepaid taxes, property tax, etc are expensed. I was reading Publication 527 and it states the appraisal and credit reports, employment verification, etc are not part of the cost basis. Does this mean those can be expensed in the year of the refinance? What about the Courier fees to deliver the documents?

[Michael Plaks]

@Jason Lam

I can give you a shortcut rule which will not be 100% accurate. Close enough though.

There is no cost basis or depreciation involved in refinance. Interest, taxes and insurance are deductible. All the other costs incurred in the refi process, including appraisal and credit report, are costs of obtaining a loan. They are added up and amortized over the life of the new loan. Amortization is very similar to depreciation.

All unamortized costs of the old loan, if any, become deductible at the time of refi.

This was, as I mentioned, a shortcut. You might have a variety of complications.