Members of the Maryland Association of Certified Public...


April 04, 1995

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q: I refinanced the mortgage on a rental property. What settlement costs can I claim as a business expense and what do I have to amortize over the life of the loan or the life of the property?

A: You should amortize over the life of the loan the refinancing costs related to securing the new loan. These may include attorney's fees and other fees in connection with the loan as opposed to the title. They also include any loan origination or discount fees ("points"). If you have any unamortized points and finance costs on a prior loan for the property, you can fully deduct the remainder of those when the old loan is repaid with the refinancing. Remember to adjust the basis of the property for refinancing costs relating to obtaining or perfecting the title, such as settlement or closing fees, title examination, title insurance, attorney's fees for document preparation, and recording and transfer charges.

Q: My husband and I took out a commercial loan against his stock to put an addition on our house. Is the interest that we pay on this loan tax-deductible?

A: Unfortunately, interest on this loan is considered nondeductible personal interest. Even though the loan proceeds are used to improve your home, it is secured by stock, not by a qualified residence.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

To submit a question, call Sundial, The Sun's telephone information service, at (410) 783-1800. In Anne Arundel County call 268-7736, in Harford 836-5028, and in Carroll 848-0338. Using a touch-tone phone, enter 6225 after the greeting. Push 1 to submit a tax question; state the question in full. Push 2 to hear a tax tip. Selected questions will be answered in the Business section. No questions will be answered by phone. Please leave your name and phone number.

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