Rental Property Past Deductions

Forum|Forum|2 years ago
June 29, 2023
1 reply
1 view

Hello - I purchased a property in Sept 2017. My daughter lived there rent free for 2 years given she was recently divorced. At the time I was told to same any improvement or rental type deductions to submit at a later date when rent was collected. After she moved out we decide to do a huge major renovation during and after covid. The property was vacant until March 2023, where it is now making rental income.

My question is, can I go back and claimed all the expenses, etc, back to Sept 2017 (never submitted before), on this year's 2023 tax return? Would that raise any flags with IRS.

Advice kindly requested, thanks Larry

Best answer by Critter-3

The original purchase price + cost to buy + all improvements made since you bought the property = cost basis that can be depreciated per the IRS regulations ... they are NOT deducted as expenses.

guywong

Level 6

No, you cannot deduct expenses incurred before the property was available for rental. When your daughter lived in the property rent free, that's not a rental. Only deductions allowed would be mortgage interest and property taxes paid, if you itemized.

The huge renovation expenses after she moved out could be capitalized and depreciated as "improvements" over 27½ years under MACRS.

Here are a couple of IRS publications that you may find useful:

https://www.irs.gov/publications/p527

https://www.irs.gov/publications/p946

Critter-3Answer

Level 15

The original purchase price + cost to buy + all improvements made since you bought the property = cost basis that can be depreciated per the IRS regulations ... they are NOT deducted as expenses.