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Payment To Reduce Interest Rate

Having a dispute with a tenant or landlord? Rental Law discussion

Payment To Reduce Interest Rate

Postby Channe » Sun Jul 10, 2016 9:05 am

s About Taxes)/payment to reduce interest rate Advertisement Expert: John Stancil, CPA - 1/17/2013 I have a residential rental property.  In 2012 I paid $4500 to the credit union to reduce my loan interest rate from 6.375 to 4.25%.

Is this considered "prepaid interest"?  How do I deduct this?  In one year or over the life of the loan(2009 fixed loan, 10 year balloon, interest rate resets in 2014)?

Thanks!

Jeff
Channe
 
Posts: 49
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Payment To Reduce Interest Rate

Postby Atur » Tue Jul 12, 2016 8:41 pm

s About Taxes)/payment to reduce interest rate Advertisement Expert: John Stancil, CPA - 1/17/2013 I have a residential rental property.  In 2012 I paid $4500 to the credit union to reduce my loan interest rate from 6.375 to 4.25%.

Is this considered "prepaid interest"?  How do I deduct this?  In one year or over the life of the loan(2009 fixed loan, 10 year balloon, interest rate resets in 2014)?

Thanks!

Jeff
Atur
 
Posts: 49
Joined: Sun Feb 09, 2014 8:04 pm

Payment To Reduce Interest Rate

Postby Adoeete » Wed Jul 13, 2016 5:00 am

Jeff,

Thanks for your question.

It depends on how the amount was characterized by the credit union.  If they are points, and based as a percentage of the loan amount, they are in essence prepaid interest.

If this is the case, you can amortize them over the life of the loan, beginning in the month the rate was adjusted.

Hope this helps.

John Stancil, CPA
Adoeete
 
Posts: 44
Joined: Wed Jan 01, 2014 7:35 pm


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