2022 rental property repair expenses (post-tenant, while vacant and not available to rent) to prep for sale in 2023

[TLA319]

Hello - I've rented out a house for several years, and gave the tenant notice in 2022 to prep the house for sale.  It is very clear how to treat expenses while it was rented and the tenant was there (Jan-Aug 2022), but I have seen conflicting information about how to treat the repair expenses I've incurred (about $20,000) during Sept-Dec 2022.  The house has not sold yet.  I don't think I can call the repair expenses "rental expenses" while it was vacant and not available to rent (Sept-Dec 2022), but am not sure.  If I have a hard time selling it, I could decide to put in back on the rental market in 2023.   And, it seems the Sept-Dec repair expenses would qualify as "selling expenses" if and when the house sells.  My house was on the market Oct-Dec 2022 and didn't sell, and now we're putting it back on the market Mar 2023.  So, can I claim the Sept-Dec 2022 repair expenses for the 2022 tax year as "rental expenses" or "selling expenses" somehow?  Or am I supposed to keep track of them and claim them in the tax year in which my house sells (2023, I hope)?  Are any tax breaks for them lost once 90 days elapses between when I incur them and when the sale happens?  Any input is appreciated.  A reference to IRS Pub. 523, 527, or other would be great.  Please let me know if there is any more info needed from me to answer this question.   Thank you!

[AmyC]

1. Not as rental expenses.

Pub 527 page 4 states: Vacant while listed for sale. If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. If the property isn’t held out and available for rent while listed for sale, the expenses aren’t deductible rental expenses.

2. Yes, part of the basis.

3. The time frame is not an issue. Those are expenses that add to the basis regardless of when the house sells.

[TLA319]

Hello Amy C - thank you for the very quick reply.  So to confirm I'm understanding correctly, it sounds like I cannot and should not try to include these expenses in my 2022 tax return at all, correct?  It sounds like I should continue to keep track of them and then use them for the tax year in which the house sells (2023, 2024, or whenever it turns out to be), correct?   And just to be clear, these are "repair/maintenance"-type expenses, not "improvement" expenses.  Specifically, they are for lighting and hardware replacements, fixes to the existing roof, plumbing repairs to address leaks, carpentry fixes to address dry rot, and things like that......as opposed to, for example, adding a new bedroom or something.   Would they still then be added to the basis of the house?   But the main thing I would like to double-check is that I cannot/should not deal with these expenses at all for my 2022 return, if I'm understanding your response correctly, because (1) the house was vacant and not available to rent and (2) it hasn't sold yet.   If you could just confirm that main thing, I can deal with the details of the rest in a future tax year.  Thank you again!     

[PatriciaV]

Correct. The costs you listed are repairs to maintain the property while it was not available to be rented. You should not report these as rental expenses in any year. Instead, you will apply them as selling expenses to reduce your gain when you sell, or as additional rental assets for depreciation should you put the property back into service.

[VegMond]

I'm in similar situation and currently trying to figure out how to file my 2022 taxes.  Do I take the rental out of service when the tenant moved out in 2022?

[TLA319]

Thank you!

[DianeW777]

It depends. if you plan to keep the rental if it does not sell, then you should not remove it from service. If you do not plan to rent it at all you should take it out of service on the date it is no longer available for rent in 2022.  Follow the instruction provided by our tax experts @TurboTaxVal and @AmyC for any expenses you might have after the rental period and before the sale.

@VegMond