Most loan costs are amortized over the new loan term. Appraisal, lender, underwriting, and points tied to obtaining the debt are generally financing costs, while title or property costs may have other basis treatment.
The expense-specific result is below. The shared BAR test, de minimis safe-harbor rule, and source guide live on the deductions hub so they are not repeated on every expense page.
A worked classification for refinance costs
A refinance includes $4,800 of lender fees on a 20-year loan and $1,200 of prepaid interest. The lender fees are spread over 240 months, while interest is deducted for the period it covers. No amount is added to the building merely because the loan changed.
Records that support this treatment
Keep both loan closing packages, payoff statement, lender identity, use-of-proceeds tracing, fee amortization schedules, and prepaid-interest detail.
IRS Publication 527 covers this timing under Points and Expenses Paid To Obtain a Mortgage. It distinguishes a new loan's amortized costs from the remaining points on debt paid off in a refinance.
Keep the invoice, the decision, and the Schedule E placement together. The broader rental property deductions guide and the Schedule E walkthrough cover the full return.
This is general information for organizing rental records, not tax advice. Elections, entity structure, mixed use, and the exact unit of property can change the answer. Bring the invoice and the underlying facts to a CPA before filing.