Carl
Level 15

Investors & landlords

I don't respond to e-mail addresses, as it negates the purpose of this public forum. Take note that I make no claims to being a trained tax professional of any caliber either. I just have 3 rental properties of my own with 30 years of experience with them and have been doing my own taxes since 2003.

Bottom line is, expenses incurred while property is not classified as a rental is just flat out not deductible. Period. But that's why I question what you call "expenses". If a property is not inhabitable for an extended period of time, it's not because "repairs" need to be done most likely. It's because the damage is so extensive that the work done to report it to a habitable condition would be considered property improvements.

For example, if the roof is torn off in a hurricane and the property is moved off it's foundation, that would make it uninhabitable.While moving the property back onto it's foundation and securing it there, and putting on a new roof may be called "repairs" by you. But the fact is, it adds to the cost basis of the property. Therefore, the cost is capitalized and depreciated. It would not matter if the property was converted to personal use or not. The cost of the property improvement is still capitalized.

But to have the property remain classified as a rental in excess of a year while it's uninhabitable can hurt in the long run when you sell the property and have to recapture that depreciation in the year of sale. It's also likely to get the attention of the IRS if you have depreciation for year or more, yet no rental income.

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