1. Yes, wait until in service, 2021.
2. 2020 expenses are all lumped together and added to the basis of the house, except for the real estate tax, it can go on your sch A.
3. No, 2020 expenses will increase the basis while 2021 expenses after renting will be listed out and deducted.
Example:
- 2020 Purchase house for $100,000.
- 2020 Spend $60,000 fixing it up to be rented.
- 2021 Rent house, expenses of repairs, mortgage interest, tax, insurance $8,000.
- 2021 taxes: List asset of house, basis equals 100,000+ 60,000 = $160,000 basis. Take out land value and you have your depreciable asset figure.
- list expenses: $8,000 divided into proper categories.
The IRS says that the property must be held out for rent for expenses to be taken. Here are the full rules from the IRS for Rental Income and Expenses. The IRS also has an interactive tax assistant tool to help with determining expenses.
IRS ITA for rental expenses.
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