The property was delivered in April 2022 and it was rented in September 2022. I did not add the property in my 2021 tax return, I am wondering if I should file an amended tax return for 2021, or if I could still add those 2021 expenses to my 2022 tax return.
All the costs of the property should be capitalized by adding them to the cost basis for depreciation purposes once the property is ready for renting.
The only thing deductible on your 2021 return would be mortgage interest and property taxes. Other acquisition costs aren't claimed until the tax year the property is placed in service and available for rent. I am assuming that was in 2022. So the tax return for 2022 would be the first tax return this property gets reported on SCH E.
It's also important to understand what gets capitalized and depreciation, and amortized and deducted.
- Costs associated with acquisition of the property are added to the cost basis of the property. They get capitalized and depreciated over time. It does not matter if those costs were paid in a prior year. For foreign residential rental real estate placed in service after 2017, it gets depreciated over 30 years.
- Cost associated with acquisition of the loan and amortized and deducted (not depreciated) over the life of the loan. It does not matter if those costs were paid in a prior year. Typical loan lives are 15 years, 30 years, and I've started seeing a fair number of 40 year loans too.