Deductibility of break fees

Question from Karen updated on 26th May 2017:

Are mortgage break fees on the sale of a rental property deductible?

Our expert Nick Ashford responded:

Yes, mortgage break fees are deductible - even when the property is being sold - but the timing of the deduction can differ.

If the financial arrangement is terminated - ie: the loan is repaid or refinanced - the fee is deductible when incurred. But if the financial arrangement continues - eg: a fixed rate is broken but the loan is not repaid - the break fee must be amortised over the remaining term of the loan.

Nick Ashford and the team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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