Discussion Archives:Rental property expenses
From TaxAlmanac
Discussion Forum Index --> Consumer Questions --> Rental property expenses
| 13 February 2006 | |
| Question:
Can I deduct expenses incurred over an extended period when my rental property was vacant AND NOT AVAILABLE FOR RENT because I was doing major repairs and maintenance? Someone suggested that I might be able to amortize these expenses over 5 years once the property is available for rent again, but I haven't been able to verify this. Details: When I moved from Ohio to Illinois, I kept my OH house as a rental property. The property was unavailable for rent between tenants for an extended period of time (Jan'04 - Aug'05) while I periodically travelled to Ohio to do repairs and maintenance. Publication 527 states, "Vacant rental property: If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant", but doesn't elaborate on when, how, or under what circumstances. Pub. 527 also states, "When to deduct: You generally deduct your rental expenses in the year you pay them", and "Pre-rental expenses: You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent." I didn't deduct any of my expenses for 2004, and I'm now preparing my 2005 tax return. I will add improvements to the cost basis of the property, and depreciate them beginning Sept. '05, when the property was again available for rent. Is this correct? Are other expenses -- travel, taxes, insurance, repairs -- lost to me, or can they be claimed? How/where would I do this? Thanks for considering my question -- any advice you can give me would be greatly appreciated. | |
| 3 March 2006 | |
| Expense incurred when the property is not avialable for rental because you are improving the property are capitalized. | |
Debbiebcpa (talk|edits) said: | 17 March 2007 |
| Mstax...are ALL expenses during the improvement period capitalized, and when can you begin depreciation - in the year of improvement or the first year of active rental? Where did you find this information? I'm reading pub 527 and, like Riched999, am reading it to mean that because it's vacant (regardless of reason), the expenses are still deductible and it is depreciable. My client is doing substantial improvements (practically rebuilding) to his property over a 2-yr period, and I'm unsure of how to treat it during this period. Any additional guidance would be helpful. | |
| 17 March 2007 | |
| The ordinary and necessary expenses paid or incurred in the management, conservation, or maintenance of property held by the taxpayer as rental property are deductible from gross income in arriving at adjusted gross income. Generally, deductions that would be allowed if incurred in a trade or business --advertising, repairs, depreciation, etc. --are deductible if incurred in connection with rental property, whether or not the property is actually rented. For example, expenses related to rental property that produces no income because of ongoing renovations are deductible if the owners do not use it personally, have rented it previously, and intend to rent or sell it in the future. However, continued rental activity is advisable if the property is to remain within the category of rental property.
Be careful of the advise you use from here. | |
| 18 March 2007 | |
| Larry - so if rental was a rental, and now is being renovated - you take the expenses during renovation? | |
Www.cpa1.biz (talk|edits) said: | 18 March 2007 |
| Just take the expenses if you actively had it for rent. If you rented it then stopped renting it to fix it, still take the expense and add the improvement to the basis if it is an improvement and expense if repair... | |
| March 19, 2007 | |
| For a rental property that is not available for rent during a period while making major improvements, I'll deduct that portion of the mortgage interest and property taxes on Sch A, and I'll capitalize all of the improvements and other expenses (including mileage, utilities, and house insurance) incurred during that period and begin depreciating that total amount when the property becomes available for rent (over 27.5 years for residential rental property). | |
| 19 March 2007 | |
| Deback - Is your thinking that the mortgage interest paid during renovation period is classified as investment interest expense? | |
| 19 March 2007 | |
| If you have a rental property, and you temporarily have it out-of-service due to repairs and maintenance required, you simply continue to expense on Schedule E unless you have items which require capitalization under those rules. | |
Debbiebcpa (talk|edits) said: | 24 March 2007 |
| This is new rental property for my client. He bought it with the intention of renting it, but it has never been actively rented due to the substantial improvements he's making on it. Can I still deduct the ordinary and necessary expenses? What about the mortgage interest? I'm curious about Deback's line of thinking on that... | |
Debbiebcpa (talk|edits) said: | 24 March 2007 |
| Ok, here's another thought. Since my client has never rented the property, could it be treated as a qualifying second home - even though it's under construction? I know everyone is super busy, but some insight into this would be extremely helpful. This guy is facing a huge tax liability because of a really dumb move involving his retirement account (and no, he did not consult his tax advisor before doing it). | |
| 24 March 2007 | |
| You can deduct the ordinary and necessary starting in the month it was available for rent. Before that costs get capitalized. | |
| 26 September 2007 | |
| Can you deduct interest paid on a mortgage for rental property? | |
Death&Taxes (talk|edits) said: | 26 September 2007 |
| Yes, if secured by the property but other facts should be given....is it the original mortgage or a re-finance to suck out the equity. You may run into problems if it is the latter. | |
| 14 April 2008 | |
| General rental property expenses? I have several rental properties and I list the income and expenses for each on schedule E. Where do I input expenses that are used for all or several properties, i.e. office supplies, annual filing fees, etc.? I have no other business income other than the rents reflected on the schedule E. Thanks.
Jack | |
| 14 April 2008 | |
| pro rate them among the rentals - if small amounts I put under the rental with the most income | |
- IU7077 asked the same question on another discussion, and got pretty much the same response. Transferring the question, and the response, here (the other discussion was actually on a different RE topic):
| 14 April 2008 | |
| Question? I have multiple rental properties and report the income and expenses on Schedule E for each. However, where do I report general rental expenses that apply to several properties, e.g. annual fees, office supplies, etc.? I have no other business income. Thanks. | |
Heathertml (talk|edits) said: | 18 July 2009 |
| Debbiebcpa, you use the term "improvements." Do you sometimes mean REPAIRS, which are normally deductible, or improvements, which are cap costs?
C | |
- Transferring another consumer question, with a response, from a tax pro discussion:
Rentalhouse (talk|edits) said: | 23 February 2007 |
| Need some clarification on rental property's improvement and remodeling.
I placed my main home as a rental property in 04/2006. I had added an addition to the house in 2005 and also remodeling the house at the same time with adding as addition. I would like to know if I could use the improvement and remodeling as my depreciation for this year's tax 2006?? in addition, I just have a FMV on my property in 01/01/2007 and the FMV is higher than my period FMV. Which FMV should I choice to start my depreciation?? Please excuse if I use the term/word in this incorrectly.. | |
| February 23, 2007 | |
| Depreciate the actual cost of the house and improvements (less the cost of the land) beginning on the date the rental property was available for rent. | |
