Can I deduct capital improvements to a rental property that didn't actually get a renter until the second week of January?

[TrulyRoxie]

I inherited my parents' house in January of last year and after months of clearing out their belongings and renovating just about anything, I contracted with a Management company in August to screen and place a renter.  A couple of options fell through until a family moved in on January 13.  Since I didn't actually have any income from the house in 2022, does that mean I can't claim any of the expenses on the property until next year?  I'm very confused.

[MinhT1 · Accepted solution]

The cost of capital improvements cannot be deducted as a rental expense. It has to be added to the cost basis of the rental home to be depreciated over 27.5 years.

Also the cost of preparing the home for rental cannot be counted as a rental expense.

Depreciation and rental expenses can be deducted from the date the property is placed on the rental market. So in your case, you can deduct depreciation and rental expenses if any from August, which the date the prperty was placed on the rental market.

[Carl]

Capital improvements on rental property can not be deducted. They have to be capitalized and depreciated over time. Enter your improvement costs in the Assets/Depreciation section and depreciation starts on the date the property was available for rent, or the date the improvement was available - whichever is later.