This may clear things up for you. If the property was available for rent in 2024, even though you didn't actually have a tenant you begin the rental activity in 2024 on the day it became available and marketed as such. It's important to enter your date placed in service (and the date purchased) when indicated. TurboTax will take the allowed depreciation for your asset.
When you enter your rental activity be sure to indicate it was available to rent at fair rental value (FRV) assuming you are charging a rent for your area and type of property. This will allow your expenses that should be entered in the rental activity.
What is your cost basis? All of the following:
Original purchase price plus purchase expenses (see the qualifying expenses below)
Capital improvements made after original purchase
What expenses are deductible in 2024? See Start up expenses and DeMinimis Safe Harbor (DMSH) below.
All maintenance - your land scaping and fencing
Advertising for tenant
Insurance, real estate taxes and mortgage interest (manually prorated from the date it was available, see below for the earlier part of the year).
Utilities prorated for the date available forward.
Other direct expenses when the property was available.
Start-up Expenses: You can deduct up to $5,000 in these expenses the first year your rental is available for rent. For the past several years this limit has been $5,000. You’ll have to deduct any additional start-up expenses in excess of the first year limit in equal amounts over the first 180 months (15 years) you’re in business. This is referred to as an amortization deduction and is similar to depreciation but somewhat different. TurboTax will help you with this deduction. See the article below.
DeMinimis Safe Harbor (DMSH) election to take the expense in full.
A capital improvement to the property would fall into the Safe harbor Election for Small Taxpayers (may not be useful this year but for the future).
- Rules for this method for capital improvements:
- Your gross receipts, including all your other income, are $10,000,000 or less.
- Your eligible building has an unadjusted basis of $1,000,000 or less.
- The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits:
- 2% of the unadjusted basis of your building or
- $10,000
Either or both safe harbor elections would be entered in the rental activity using Miscellaneous expenses if you choose this method.
- Enter your description and amount
Keep close track of these expenses because they will be used to reduce cost basis at the time of a future sale, thereby increasing gain at that time.
Settlement Fees allowed to add to cost basis: Government Recording and Transfer Charges
- Recording fees
- Title Charges
- Lenders Title Policy
- Settlement or Closing Fee
- MLC - Municipal Lean Certificate
- Title Exam
- Owners title Insurance
Settlement Fees that are NOT part of the cost basis: Loan charges - Loan charges are part of the loan, not cost basis
- Application fees
- Lender fees
- Appraisal Fee
- Inspection Fee
- Condo Questionnaire
- Credit Report
- Debt Report
The costs associated with obtaining a mortgage on rental property are amortized (spread out) over the life of the loan.
- For example, if it cost you $3,000 to refinance your 30-year mortgage, you'd be able to deduct $100 per year for the next 30 years. Select 'Intangible, Other Property' for amortization.
@Matthew B
[Edited: 04/14/2025 | 8:03 AM PST]
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