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duckydoo
New Member

How do I enter my startup expenses for my rental property?

 
1 Best answer

Accepted Solutions
MargaretL
Employee Tax Expert

How do I enter my startup expenses for my rental property?

All your expenses (except property taxes and mortgage interest if you have one) paid BEFORE the property was listed as available for rent are simply added to the cost of your rental property (in your records). No additional entry TurboTax is rquired.  This includes your "closing" expenses, such as appraisal costs, fire insurance, as well as your repair costs. The total amount is called adjusted basis (not just the cost, but the cost plus all your pre-rental expenses).

Once the property is available for rent, you may start depreciating the rental property and use the "adjusted basis" in the Sale of Property/Depreciation section. You can deduct your property taxes and mortgage interest, in the Deductions & Credits section, for pre-rental time frame. Once the rental is available, they are your rental expenses.

If your start up expenses are paid while the property is available for rent, but is not rented, they are your regular expenses, entered in the Expenses section.

  1. Federal Taxes
  2. Wages & Income
  3. Rental Properties and Royalties - follow the instructions  Where do I enter income and expenses from a rental property? - once you go through some general information, you'll arrive at Rental summary screen. Please select Expenses or Sale of Property/Depreciation and enter your property.


For more information, please see link below:

https://ttlc.intuit.com/questions/2569433-what-kinds-of-rental-property-expenses-can-i-deduct 

https://www.irs.gov/taxtopics/tc414.html 

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4 Replies
MargaretL
Employee Tax Expert

How do I enter my startup expenses for my rental property?

All your expenses (except property taxes and mortgage interest if you have one) paid BEFORE the property was listed as available for rent are simply added to the cost of your rental property (in your records). No additional entry TurboTax is rquired.  This includes your "closing" expenses, such as appraisal costs, fire insurance, as well as your repair costs. The total amount is called adjusted basis (not just the cost, but the cost plus all your pre-rental expenses).

Once the property is available for rent, you may start depreciating the rental property and use the "adjusted basis" in the Sale of Property/Depreciation section. You can deduct your property taxes and mortgage interest, in the Deductions & Credits section, for pre-rental time frame. Once the rental is available, they are your rental expenses.

If your start up expenses are paid while the property is available for rent, but is not rented, they are your regular expenses, entered in the Expenses section.

  1. Federal Taxes
  2. Wages & Income
  3. Rental Properties and Royalties - follow the instructions  Where do I enter income and expenses from a rental property? - once you go through some general information, you'll arrive at Rental summary screen. Please select Expenses or Sale of Property/Depreciation and enter your property.


For more information, please see link below:

https://ttlc.intuit.com/questions/2569433-what-kinds-of-rental-property-expenses-can-i-deduct 

https://www.irs.gov/taxtopics/tc414.html 

trapezewdc
Level 2

How do I enter my startup expenses for my rental property?

Quick question. I bought a property and did a bunch of improvements to it in 2017 and didn't start rental activities until 2018. For 2018 tax return, can I still add those improvements done in 2017 to my purchase cost to increase my cost basis so that I can take a higher depreciation in 2018 tax return ?

While I am not sure if it matters, the property I bought is a condo with 2 master suites that share living room, dining, and kitchen while each master suite has its own bath inside it. I occupy one suite and a renter occupies the other. Thanks.
jsand1
New Member

How do I enter my startup expenses for my rental property?

Thanks for the information.  If property taxes and mortgage interest prior to being rentable are expense and not added to the basis, and entered as you say to TT under Deductions and Credits, do they get caught up in the Itemized Deductions / Standard Deduction issue?  And if so, and the Standard Deduction is larger, does that mean the rental property taxes and interest are lost?

Carl
Level 15

How do I enter my startup expenses for my rental property?

I am in disagreement with @MargaretL 

When it comes to long term residential rental real estate, any and all expenses incurred before the property was "available for rent" are just flat out not deductible at all. (do not confuse this with property improvements.)  This especially includes those expenses incurred in preparing the property for rent, for that *very* *first* *time* and does not include expenses incurred during vacant periods between renters.

IRS Publication 527 has no allowance for expenses incurred before the property was available for rent. So for rental property there is no such thing as start-up expenses.

Now property improvements are a different story. A property improvement adds "real" value to the property, and it doesn't matter when that property improvement was done either. Property improvements done before the property was placed in service are entered in the Assets/Depreciation section and will have the same "in service" date as the property itself.

Property improvements completed after the property was converted to a rental are also entered in the assets/depreciation section. However, their in service date will be some date "after" the property was originally placed in service.

Long term residential rental real estate income is reported on SCH E with no exceptions. Yes, I said *NO* exceptions.

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