A two year remodel of existing rental -- is it still considered a rental though I havent rented it out ?

[USAFdad1]

Can I continue to claim my rental as a rental if I have been remolding it for the last two year. Both due to COVID and the fact the property is several states away it has just taken some time but will back on the market soon.  Turbo Tax tells me to not count as a rental when I plug in zero for days rented.

[PattiF · Accepted solution]

 

Yes, your rental is still considered a rental even if you didn't rent if out for the last two years.

As long as the property is not available for rent, the asset of renovations holds until that day.  Once the property is available for rent again, then you will add all of the costs for renovation and enter that asset for depreciation with a starting date in 2022. Since you did have activity in 2021, you can continue with the expenses because the intent was not to remove it from service.

After you enter that the rental was not rented all year, do not enter any numbers for Days rented at a fair rental price or Personal use. The property will stay as a rental and you can deduct expenses like property taxes and insurance.

From the IRS Publication 527:

Idle Property

Continue to claim a deduction for depreciation on property used in your rental activity even if it is temporarily idle (not in use). For example, if you must make repairs after a tenant moves out, you still depreciate the rental property during the time it isn’t available for rent.

Vacant rental property.

If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. However, you can’t deduct any loss of rental income for the period the property is vacant.

[USAFdad1]

Thank you so much!  One follow up question, if you please.  Since all of my travel to this location over the last two years has been only for this remodel, do I count that as part of the overall  improvement cost, or do I list separately each year as travel cost. only? 

[JulieS]

Yes, you would list that separately from the improvement cost as travel expense.