Solved: I forgot almost 6k on my rental expenses. Will that make a big difference on my tax refund.
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New Member

I forgot almost 6k on my rental expenses. Will that make a big difference on my tax refund.

 
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Level 15

I forgot almost 6k on my rental expenses. Will that make a big difference on my tax refund.

Rental Property Dates & Numbers That Matter.

Date of Conversion - If this was your primary residence before, then this date is the day AFTER  you moved out.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. vacant periods between renters count also PROVIDED you did not live in the house for one single day during said period of vacancy.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence or 2nd home, after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.

Other relevant information is already posted in the previous "answer" in this thread.

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Level 15

I forgot almost 6k on my rental expenses. Will that make a big difference on my tax refund.

Rental Property Dates & Numbers That Matter.

Date of Conversion - If this was your primary residence before, then this date is the day AFTER  you moved out.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. vacant periods between renters count also PROVIDED you did not live in the house for one single day during said period of vacancy.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence or 2nd home, after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.

Other relevant information is already posted in the previous "answer" in this thread.

View solution in original post

New Member

I forgot almost 6k on my rental expenses. Will that make a big difference on my tax refund.

so I cannot deduct any costs before it was available for rental.
Level 15

I forgot almost 6k on my rental expenses. Will that make a big difference on my tax refund.

Nope. Not a penny. But understand that there is a well defined difference between a repair/maintenance expense, and a property improvement, as defined in the answer below. While property improvements are not deducted per-se, they are depreciated, and it doesn't matter when that property improvement was done, or if the property was personal use or rental at the time, so long as it was done after you acquired ownership of the property.
Level 15

I forgot almost 6k on my rental expenses. Will that make a big difference on my tax refund.

It could. But only if you have taxable rental income reported on line 17 of your 1040. If you have a positive amount on line 17, then your forgotten rental expenses could reduce it by that amount, but it will not reduce it to less than zero.

Also, with $6K of what you call "rental expenses", I question if they are "in fact" expenses. With that much "forgotten", (which can happen to anyone) I tend to think that what you forgot was not "expenses" per-se, but probably more like a property improvement. Check out the below definitions to see if that's a possibility for you.

RENTAL POPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED

Property Improvement.

Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.

To be classified as a property improvement, two criteria must be met:

1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.

2) The improvement must add "real" value to the property. In other words, when  the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.

Cleaning & Maintenance

Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent are not classified as cleaning/maintenance costs. They are instead classified as startup costs, amortized as such and depreciated over time.

Repair

Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent are classified as startup costs, amortized as such and depreciated over time.

Startup Costs

Please note that if residential rental income is not your PRIMARY business, and your PRIMARY source of income, then your rental business is considered to be passive, and you flat out, no way, no how , are not allowed to deduct your startup costs. Period. The IRS says so. See https://www.irs.gov/pub/irs-drop/rr-99-23.pdf and please take note that rental property produces “passive” income, while other types of businesses produce “active” income. Your rental property is not classified as your “active” business, unless you are a real estate professional, an active participant in the management of the property, and it provides a substantial (more than half) amount of your taxable income for the year. All three requirements must be met. There are no exceptions

Start up costs are expenses incurred while preparing the property for rent, with the express purpose being to prepare it for rent, before it is available for rent. These costs do include repair, cleaning and non-recurring maintenance cost. It does NOT include property improvements. With a normal business that produces active income (rental income is passive) you would amortize these costs over 15 years. But you can’t do that with a rental property. However, you can deduct a maximum of $5000 in startup costs in the first year the rental is available for rent, PROVIDED your total startup costs do not exeed $50,000. This is reported on line 18, “Other Expenses” of SCH E, and should be labeled “start up expenses”.

Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.

However, when you do something like convert the garage into a 3rd bedroom for example, making a  2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.


New Member

I forgot almost 6k on my rental expenses. Will that make a big difference on my tax refund.

You are right about improvement but I think I have filed completely wrong.  I checked the box that I was not a real estate agent and I think that makes my rental passive but if so why did it lead me to file my startup expenses.  There was a depreciation section I didn't understand also.  I'm so confused atm.
New Member

I forgot almost 6k on my rental expenses. Will that make a big difference on my tax refund.

I have filed as of yesterday.
Level 15

I forgot almost 6k on my rental expenses. Will that make a big difference on my tax refund.

You can do nothing to change your tax return until processing of your already filed return is complete. It's not complete until one of two things have occurred.
1) If a refund is due, you have received the refund, or
2) If you owe taxes, your tax payment has cleared your bank.
Additional info on reporting rental income/expenses is in a separate answer post in this thread. You may which to print it for future reference.
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