My wife and I own the house next door as a single-family rental property. In August 2020 a derecho struck Iowa and this rental property sustained significant damaged. In December 2020, I accepted a check for $2,000 and rented this property for a 4-month period from January 2021 thru April 2021.
After the 4-month rental period concluded we determined that the property was not in viable rental condition and stopped renting it. It should be noted that prior to the derecho the property rented for $945 per month.
The $2,000 check was reported as rental income in 2020 since it was received in 2020 and thus, we will be reporting zero income in 2021 for this rental property. We are going to report that it was a rental for only 120-days (January thru April) in 2021. Should we input into TurboTax our 2021 expenses, assets/depreciation incurred for the full year? Or should they be prorated?
We’re still debating, but we might demolish the house in 2022. Is there anything that we should consider from a tax perspective when making this decision?
