Loan Amortization, Loan Costs | Tax Deductions

by Property Management Software on December 1, 2008

You should deduct all of your loan costs to maximize your tax savings.

Unlike title charges, loan costs do not add value to your property, and therefore must be must be amortized over the life of your loan (and not depreciated with the property basis.)

To find out your yearly amortization deduction, add all the loan costs from your property’s settlement statement (Lines 800-807) and divide it by the loan term (30 years, etc…)

You will report this yearly amortization deduction on IRS Form 4562 for the life of the loan.

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

You can deduct the remaining points on Schedule E under “other expenses.”

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