Amortizing Loan Costs

Last Minute Tax Tip - Loan Costs need to be Amortized

You can maximize your tax savings by deducting all of your loan costs. Loan costs do not add value to your property (like title charges), and must be amortized over the life of your loan (and not depreciated with the property basis.)

Find your amortization deduction by adding all the loan costs from your property's settlement statement and dividing by the loan term (30 years, etc...). The yearly amortization deduction gets reported on IRS form 4562 for the life of the loan.

If you refinance the property, you will get to deduct all the remaining loan costs that year, after which you will have a new amortization schedule for your new loan.

Everyone's tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.

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