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Can I deduct expenses incurred in 2017 readying a property for rental in 2018?

Answers on intuit website give both Yes and no to this question. 

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1 Best answer

Accepted Solutions
CathiM
New Member

Can I deduct expenses incurred in 2017 readying a property for rental in 2018?

Here are some excerpts from the IRS Pub 527 Residential Rental Property  In short, the property has to be available for rent to take expenses. You don't have to have rental income, it just has to be available for rent. However, your major repairs and improvements have to be capitalized and added to the cost basis. This is the case even if it was rented when you did the improvements. This can reduce your taxable gain (or increase your loss) when you sell the property.  You can however, expense up to $2,500 in repairs and purchases of tangible property per invoice under the safe harbor de minimis threshold rules, see below.

Here are the IRS rules:

"Pre-rental expenses.You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent."

"Repairs and Improvements. Generally, an expense for repairing or maintaining your rental property may be deducted if you aren’t required to capitalize the expense.

Improvements. You must capitalize any expense you pay to improve your rental property. An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Table 1-1 shows examples of many improvements.

Betterments. Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property.

Restoration. Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition.

Adaptation. Expenses that may be for adaptation include expenses for altering your property to a use that isn’t consistent with the intended ordinary use of your property when you began renting the property.

De minimis safe harbor for tangible property. If you elect this de minimis safe harbor for your rental activity for the taxable year, you aren’t required to capitalize the de minimis costs of acquiring or producing certain real and tangible personal property and may deduct these amounts as rental expenses on line 19 of Schedule E. For more information on electing and using the de minimis safe harbor for tangible property, see chapter 1 of Pub. 535, Business Expenses.

Safe harbor for routine maintenance. If you determine that your cost was for an improvement to a building or equipment, you may still be able to deduct your cost under the routine maintenance safe harbor. See Pub. 535 for more information."

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1 Reply
CathiM
New Member

Can I deduct expenses incurred in 2017 readying a property for rental in 2018?

Here are some excerpts from the IRS Pub 527 Residential Rental Property  In short, the property has to be available for rent to take expenses. You don't have to have rental income, it just has to be available for rent. However, your major repairs and improvements have to be capitalized and added to the cost basis. This is the case even if it was rented when you did the improvements. This can reduce your taxable gain (or increase your loss) when you sell the property.  You can however, expense up to $2,500 in repairs and purchases of tangible property per invoice under the safe harbor de minimis threshold rules, see below.

Here are the IRS rules:

"Pre-rental expenses.You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent."

"Repairs and Improvements. Generally, an expense for repairing or maintaining your rental property may be deducted if you aren’t required to capitalize the expense.

Improvements. You must capitalize any expense you pay to improve your rental property. An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Table 1-1 shows examples of many improvements.

Betterments. Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property.

Restoration. Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition.

Adaptation. Expenses that may be for adaptation include expenses for altering your property to a use that isn’t consistent with the intended ordinary use of your property when you began renting the property.

De minimis safe harbor for tangible property. If you elect this de minimis safe harbor for your rental activity for the taxable year, you aren’t required to capitalize the de minimis costs of acquiring or producing certain real and tangible personal property and may deduct these amounts as rental expenses on line 19 of Schedule E. For more information on electing and using the de minimis safe harbor for tangible property, see chapter 1 of Pub. 535, Business Expenses.

Safe harbor for routine maintenance. If you determine that your cost was for an improvement to a building or equipment, you may still be able to deduct your cost under the routine maintenance safe harbor. See Pub. 535 for more information."

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