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roncar9
Level 1

How do I claim extensive expenses when rental property is idle for all of 2017? (Some personal use time occurred.)

At the conclusion of a tenancy in 2016, I began extensive repairs on the single family residence I have owned and rented for the previous 25 years. (Some of these are improvements which I will add to the basis and depreciate according to Pub. 527.) I received no rental income in 2017 as work was ongoing during most of that time. However, my son lived in the residence rent free for 5 months ending June 1, 2017. I have computed personal use time as 121 days as the other days he lived there we were engaged full time in the repairs. Expenses include use of vehicle to obtain supplies and commuting computation. Because of the repairs and improvements I am able to receive almost double the rent obtained previously. As of February 1, 2018, the property is rented.
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PatriciaV
Expert Alumni

How do I claim extensive expenses when rental property is idle for all of 2017? (Some personal use time occurred.)

Yes, since you held the property for rental purposes, even while it was vacant, you can deduct ordinary and necessary expenses required to maintain the property.

From IRS Pub 527: Vacant rental property.   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. However, you cannot deduct any loss of rental income for the period the property is vacant. 

Ordinary and necessary expenses are considered to be costs that you would have incurred if the property had been rented. This includes maintenance and depreciation. 

Note: For TurboTax purposes, "rented" means held for as a rental property, not necessarily occupied. If you report zero rental days, TurboTax will not calculate depreciation properly.

However, all costs related to major renovations that increased the market value of the property should be consolidated and capitalized as a Rental Improvement.

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1 Reply
PatriciaV
Expert Alumni

How do I claim extensive expenses when rental property is idle for all of 2017? (Some personal use time occurred.)

Yes, since you held the property for rental purposes, even while it was vacant, you can deduct ordinary and necessary expenses required to maintain the property.

From IRS Pub 527: Vacant rental property.   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. However, you cannot deduct any loss of rental income for the period the property is vacant. 

Ordinary and necessary expenses are considered to be costs that you would have incurred if the property had been rented. This includes maintenance and depreciation. 

Note: For TurboTax purposes, "rented" means held for as a rental property, not necessarily occupied. If you report zero rental days, TurboTax will not calculate depreciation properly.

However, all costs related to major renovations that increased the market value of the property should be consolidated and capitalized as a Rental Improvement.

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