Expenses before renting

[ezag]

Thanks for this! Is the "date of conversion" more arbitrary, meaning, we decided we were going to rent out property eventually back in Oct. 2022, but slowly were making improvements to it after that date.  We still used the property but each visit we accomplished more to make it renter worthy. Just wondering how this is defined..

[DianeW777]

The date placed in service is the date you would use when the property is ready and available for rent. The purchase date should also be entered when asked so that when and if you sell in the future TurboTax does know the correct holding period.  

The capital improvements will become part of the purchase price when you do place it in service, as well as purchase expenses.

If you used the property for personal purposes before you converted it to a rental property, then you must compare the fair market value (FMV) to the actual cost.  The lower of the two would be considered the cost and depreciable basis.  If you never used the property for personal use, then the cost can be used once it is available for rent.

• IRS Publication 527
• IRS Publication 946

@ezag 

[Edited: 03/23/2024 | 6:42 AM PST]

[Carl]

@DianeW777 

The date placed in service is the date you would use for the purchase date.

You might want to check that. It's no problem for the purchase date to be years before the in service date. The program asks for both dates separately. Do note that nowhere on any of the 4562's do I see a separation of those two dates either. Kinda makes one wonder why it even asks for the acquisition/purchase date. 🙂 Maybe it's somewhere else on the tax return I'm not aware of? Don't know off hand.

[wawalter]

Hello,

I think reading through this thread answers my question, but I just want to make sure I have it straight.

Timeline for our rental property:

2023/01 purchased property

2023/01-2024/04 spent a whole bunch of time and money fixing it up

2024/07-2025/02 rented out condo

2025/03 selling condo

If I understand correctly, any expense before 2024/07 or after 2024/02 cannot be used to offset our income from renting the property, only the expenses incurred during that time can count against income, is that correct?

The expenses from outside the rental time could only be used to offset any possible capital gains, is that also correct?

Thanks,

Bill

[ThomasM125]

The improvements before July of 2024, when you started renting the property, could be added to the cost basis of the property for depreciation purposes while it was rented and also for its cost basis upon sale. Any improvements after February of 2025, when you stopped renting the property, could also be added to the basis of the property to increase the basis for its eventual sale. None of the expenses before you started renting the property or after you stopped renting it could be deducted from income until you sell the property, except with respect to the depreciation allowed while you were renting it.