Investors & landlords

It depends.  You are allowed Start Up expenses, covered below. The answers to your questions are listed below.

1. The original cost basis will be used as an asset for your business and must be depreciated and you will use the calculated depreciation expense each year you rent the property.
2. You can deduct the mortgage interest and property taxes using the prorated amount for the rental period in the first year and then if rented full time in 2024 you can use the full amount paid for the  year. 
   1. Principal payments on the mortgage are never a deduction, you are already using the full cost of the home as a depreciable asset (it's the same money).
3. The expenses before the property was available, but were necessary to prepare for making it available for rent are 'Start Up Expenses'.  However the IRS indicates the activity must be 'for profit' and residential rental properties are considered 'passive income' activities. This factors into how the start up costs for a rental should be treated, which is different than a profitable trade or business.  See information below about passive activity for rental real estate.
   1. Your start-up costs are accumulated until you become operational.  Expenses such as pre-operational acquisition costs, investigation costs, proof-of-concept costs are included in start-up costs. For a residential rental activity you should add these costs to the property as part of the cost basis, then use the total as the cost of the home for depreciation.
   2. The Asset Selection is Rental Real Estate Property > Continue (see the image below)
      • Must be only the rental portion if not converted to a rental full time

Active participation is a requirement to be allowed to reduce other income by the loss on your rental property.  There is also an income limit that begins to reduce that amount.

Phaseout Rule: The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that’s more than $100,000 ($50,000 if you’re married filing separately). If your modified adjusted gross income is $150,000 or more ($75,000 or more if you’re married filing separately), you generally can’t use the special allowance. This is because the special allowance is reduced to $0 since the modified adjusted gross income is over the $100,000 amount.

• Sign into your TurboTax return > Search (upper right) > Type rentals > Press enter > Click on the Jump to... link > Edit next to the Rental Activity  > Edit next to the Property Profile or General Info > Continue to the question about active participation
• Continue to the end of the section for TurboTax to save your changes.

@cpgnv23

[Edited: 03/25/2023 | 6:02 AM PST]