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How do I enter a large special assessment on a vacation home/ short term rental that was unable to be used for an entire tax year due to damage.

I purchased a condo in 2021 and was to rent it in 2023.  Due to Hurricane Ian, damage was found and I was unable to rent it for the entire 2023 tax year.  During this time I paid over $60,000 in special assessments as the damage to the building was not covered by insurance.  

 

Am I able to deduct this loss and if so, how do I go about doing it?

 

Thank you!

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6 Replies
PatriciaV
Employee Tax Expert

How do I enter a large special assessment on a vacation home/ short term rental that was unable to be used for an entire tax year due to damage.

Was the property ever listed as available to be rented? The IRS allows you to claim depreciation on the property while it is idle (not in use), if was placed into service (listed to be rented) at a prior date. Otherwise, you have an increased basis, but no deduction.

 

See IRS Pub 527 - Idle Property

 

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Carl
Level 15

How do I enter a large special assessment on a vacation home/ short term rental that was unable to be used for an entire tax year due to damage.

Am I able to deduct this loss and if so, how do I go about doing it?

(I am assuming you have never ever ever reported this property on SCH E since you purchased it in 2021).

No. It's not deductible at all. Instead, it gets added to the cost basis of your property. For example, if you paid $100,000 for the condo in 2021, then paid a $60,000 special assessment in 2023, your cost basis on the property is now $160,000.  This won't help you "right now". But it will definitely come into play for depreciation when/if you convert the property to a rental in 2024.  It will also help you years from now when/if you sell the property.

How do I enter a large special assessment on a vacation home/ short term rental that was unable to be used for an entire tax year due to damage.

Hello!  Yes it was available to be rented during  2022.  It was also scheduled to be rented for several weeks during 2023, however all had to be cancelled due to the construction of the building which lasted the entire year, leaving the entire building uninhabitable.

RobertB4444
Employee Tax Expert

How do I enter a large special assessment on a vacation home/ short term rental that was unable to be used for an entire tax year due to damage.

Because the event that caused the disaster was Hurricane Ian it is a qualified disaster and any money you spent on repairs that was not reimbursed by insurance is eligible for a disaster deduction.

 

Here is the IRS info on disaster deductions.

 

Here is the FEMA website to get the numbers you need for hurricane Ian.

 

You can enter the disaster loss into TurboTax in the 'Deductions and Credits' section under 'Other Deductions and Credits' - 'Casualties and Thefts'.

 

@krobertson33 

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DAF24
New Member

How do I enter a large special assessment on a vacation home/ short term rental that was unable to be used for an entire tax year due to damage.

If the total loss was unknown until end of 2023/2024 due to construction schedules but the casualty event occurred in 2022, do I need to amend my 2022 return or could this be part of the 2023 return under Casualties and Thefts?  Also, are the assessments for common area repairs such as roofs, paint, pools, etc. able to be claimed as Casualty cost?

PatriciaV
Employee Tax Expert

How do I enter a large special assessment on a vacation home/ short term rental that was unable to be used for an entire tax year due to damage.

According to IRS Pub 547 Insurance and Other Reimbursements, include the taxable part of the insurance payment in income for the year you regain the use of your home or, if later, for the year you receive the taxable part of the insurance payment.

 

If the assessed repairs were caused by the same casualty event, the cost to you should fall under the same Casualty Loss.

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