Expenses related to preparing to sell Rental Property

[jderke]

Hello,

I rented out a condo for nine months in 2019.  It was empty for three months.  I spent just over $2000 preparing to sell it (plumber, garage door repair, dishwasher repair, paint, carpet cleaning service, etc.).    I spent the money in 2019.  The original buyer fell through.  We have a new buyer and expect to close in February.   Do I deduct these expenses in 2019?  Somehow increase the basis of the unit?   Or hold the expenses and deduct them in 2020?    

Thank you. 

[Anonymous_]

You can deduct the expenses in the year they are incurred provided the property is held out and available for rent while listed for sale. Otherwise, the expenses are not deductible as rental expenses.

See https://www.irs.gov/publications/p527#en_US_2018_publink1000219000

[Carl]

For y our 2019 taxes, you ***NEED*** to leave the property classified as a rental. If you convert it to personal use on your 2019 taxes, you'll risk a tax reporting nightmare on your 2020 taxes in the process of reporting your gain/loss on the sale. So whatever you do, do not indicate that "ANY" assets were removed for personal use on your 2019 tax return and do not convert the property to personal use.

Simply state the property was rented "the whole year" and leave it at that. Otherwise, when you do the 2020 taxes next year, the nightmare will not be pleasant and you'll find it hard to wake up from.

THis way, you claim claim your repair and cleaning/maint expenses as rental expenses. The program will deal with all your carry over losses *FOR YOU* (which will include those aforementioned expenses) when you report the sale on your 2020 taxes next year.