You can't take expenses on vacant property.
@ColeenD3 that's not quite accurate the way you worded it, and can be misleading. You misinterpreted it. It specifically states, "you can not deduct any loss of rental income". It doesn't say anything about not being able to deduct "expenses".
@buzzyfrantz to claim your rental expenses there's a few things that have to be true.
- You did not convert the property to personal use in 2019.
- You did not indicate that you "stopped using this asset" for any assets listed in the assets/depreciation section.
- You were in the process of returning the property to a condition so that it can be rented.
- You are able to demonstrate an intention to rent in 2019 if it were possible, or demonstrate an intention to return it into rental condition in 2019.
If so, and you do "in fact" still have the intention (as well as the means) of restoring the property back to the same usable condition or better, that it was in prior to your loss, then you can leave it classified as a rental and claim your "ordinary" rental expenses. Just understand two things that are true if you do this.
1) While you will claim your rental expenses, they will not be "allowed" since there is no rental income to deduct them from. They'll just be added to your existing carry forward amount and carried forward to the next year.
2) The property will continue to depreciate, and so long as you leave it classified as a rental you must continue to depreciate it as required by federal law.
So in the program, if you select the option for "I did not rent or attempt to rent this property in 2019" then the program will *FORCE* you to delete the SCH E. Do not do that, or you'll just shaft yourself in the future. Simply indicate that your number of rental days is zero, and your number of personal use days is zero. Enter ZERO for rental income, then your rental expenses and press on with life.
Be careful here, because with the extensive damage you're fixing, a vast majority of it is *NOT* going to be a repair expense. It will be a property improvement. There is a difference and it matters big time for your taxes.
Absolutely nothing (not one penny) concerning property improvements will be entered into the program until the first tax year the property is actually "available for rent" again.
Now if this is a case of where it may be several years before this property is rented again, you really "NEED" to convert it to personal use and stop depreciation. Otherwise, it's gonna kill you financially in the long run.
For the below, I fully expect more than 90% of your repair and restoration costs to be classified as a property improvement. You might be surprised to learn just what you can include in those improvement costs too.
RENTAL PROPERTY 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 deductible.
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 not deductible.
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.
