How to recognize renovation expenses on rental property before receiving rent?

In 2021, I bought 2 rental properties in late October. I put Property 1 in service immediately and collected rent in 2021 so I can recognize mortgage interest in my 2021 return. Property 2 required renovation which wasn't completed until 2022, so I had no rental income in 2021. Turbotax won't recognize Property 2 as a rental until I collect rent.

How do I recognize actual 2021 expenses on Property 2, such as mortgage interest and renovation expenses in my 2021 taxes?

posted

You can't. You don't have rental expenses until you place the property in service. You would add the improvement to the basis of the building and depreciate the entire amount in 2022, once you place the property in service.