Can I take deduct repair expenses on a rental property that the tenants moved out after they damaged the property?

[ldavis49]

The property was my home in 2003. I converted to rental in 2009. Tenants flooded home in October 2016 and had to move out while repairs were being done. Terminated lease November 4 2016. Repairs were complete by November 17. Placed house on Market for sale on November 14. House sold in Feb. 2017.  How do I report all this and claim other expenses such as yard maintenance and utilities incurred during repair and prior to sale. What exactly is personal use of the property?

[MichaelL1 · Accepted solution]

Personal use would be if you moved in it to use personally.

Based on above it does not appear you have any.

If the house was available to be rented while for sale all expenses are deductible. 

If not, then the expenses, for interest and property taxes are.  The expenses incurred to fix the damages from while it was rented are deductible. 

Post a comment if you still have questions, thank you. 

[Sdong258]

The answer is still not clear to me unfortunately. My question is as follows: I replaced the damaged carpet caused by the tenant's dog who moved out, and then I, as the owner, move back to live in this property. Can I deduct the cost of carpet replacement?

[Carl]

@Sdong258  you are an "add on" in this thread. In the future, when you have a question please start your own thread. Your situation is ***NOT*** the same (or even close to the same) as the original poster in this thread.

 I, as the owner, move back to live in this property

Why did you move back in to live in this property? (Rhetorical question).

If you moved back into the property to live in it as your primary residence, 2nd home, vacation home or *ANY* other type of "Personal pleasure" use, then you have to convert this property back to personal use. The date of conversion has to be one day "after" the last renter moved out.

I replaced the damaged carpet caused by the tenant's dog who moved out,

Nothing done after the last tenant moved out is deductible if you were required to convert the property back to personal use for the reasons stated above. Any claims to rental expenses ended the day after the last renter moved out, since that's the day you converted the property to personal use. So any expenses incurred after the last renter moved out are *not* rental expenses. They are personal expenses and are just flat out not deductible.

@ldavis49 

I take specific note that you are referring to tax years 2016 and 2017 (twenty sixteen and twenty seventeen). So I am assuming that you are just now getting around to doing your taxes for those years.

This is tricky, because the property was vacant from the time the last tenant moved out, until you sold the property. What makes this tricky is not the fact that it was vacant, but the fact that your period of vacancy from the time the last renter moved out until you closed on the sale of the property, crosses tax years.

What exactly is personal use of the property?

If you lived in the property as your primary residence, 2nd home, vacation home, or *ANY* other type of "PERSONAL PLEASURE" use for even one single day after the last renter moved out, then that's personal use.  Do not confuse yourself here. If you lived in the property for say a week for the *PRIMARY* *PURPOSE* of cleaning it up and turning the property around for the next renter, or fixing it up for sale, that is *NOT* personal use. Not even close.

Now, for 2016 the property will remain classified as a rental for the entire year. So when asked by the program, you *WILL* answer YES to the quesion, "was this property rented the whole year?". Again, answer YES and be done with it, assuming you have no personal use days of the property in 2016.

As for how you'll deal with this on your 2017 tax return, one thing at a time here. Get your 2016 tax return done, completed, printed, signed and "ready to mail" before you even bother with the 2017 taxes. Otherwise, you'll just add to your confusion and/or misunderstanding without even realizing you are confused.

[MP51]

Similar to the situation above…

My tenant damaged my garage by driving their car into the front of it.  It created structural damage.  The tenant moved out 09/01, and I moved back in the same month.  The repairs were not completed until 10/01.  Can these repairs be written off due to the damage being done by my tenant?  Or no, because its now converted to personal use?

[MichaelL1]

the answer is "no" tax deduction --Please read Carl's answer above as it is "right on point."

From above:

"Nothing done after the last tenant moved out is deductible if you were required to convert the property back to personal use for the reasons stated above. Any claims to rental expenses ended the day after the last renter moved out, since that's the day you converted the property to personal use. So any expenses incurred after the last renter moved out are *not* rental expenses. They are personal expenses and are just flat out not deductible."

[Mike9241]

did you have insurance? the damage might be covered.

[Ash82]

I disagree with premise the repairs for tenant caused damages are not deductible following conversion to personal use. I refer to page 18 of Pub 527 - "For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. Don’t count them as days of personal use
if:
• You rented or tried to rent the property for 12 or more consecutive months, or
• You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property."

Provided the property was rented for at least 12 months, it appears that you dont have to treat the remainder of the year as personal use for purposes of restoring damage caused during tenancy period