I bought a rental property under an LLC with a hard money loan with the intension of fixing it up and then renting it out. I bought the house in April and worked on it until it was on the market for rent in October.
I know that from when it is available for rent, I am able to deduct the interest. My question is whether or not I am able to deduct the interest and utilities incurred while the property is under renovation from April to October.
I would really appreciate some feedback!
No, you aren't able to deduct the interest or utilities as expenses for April to October since your rental was not available for rent. However, you could add the expenses to the basis of your of your rental for depreciation purposes.
Thank you for your response!
So when TurboTax is calculating the basis for my property do I add these expenses to the capital improvements amount? It's the only time it asks me for any additions to the property basis on top of what the house minus the land is worth.
do I add these expenses to the capital improvements amount?
Yes. For example, if you spent $10,000 renovating the kitchen and it took a month to do so, you can include the cost of the utilities you paid for, as a part of the renovation cost. So if you paid $100 for electric/water that month, when entering the kitchen renovation costs in the Assets/Depreciation section, your cost basis on that asset would be $10,100, classified as rental real estate and depreciated over 27.5 years with depreciation starting on the date the asset is placed in service.