Which repair expenses can I claim before converting a second home into a longterm rental?

[CORETAX9000]

Hello, thanks in advance for the help. 

In 2021, we converted our second home into a long-term rental (beginning in October 2021). We invested in repairing and updating the property in the months leading up to signing a lease with our tenant. 

My question is: Am I able to claim any repairs or maintenance expenses made to the property prior to signing a lease with the tenant? 

[DaveF1006]

This is a revision to my earlier answer. Any expense you incurred in updating and repairing the property must be added to the basis of your home prior to placing your rental into service. Your basis is the lower of the stepped-up basis of your home or the Fair market Value (FMV) of your home when you place it into service. Your stepped up basis is what your originally paid for your home, improvements made to your home while you were a resident plus the recent upgrades and repairs you made.

Once you place your rental in service, you will list your rental unit as an asset to be depreciated. Any improvements you beyond this point will be listed as assets to be depreciated. Things like driveways, new plumbing, electrical wiring, new stoves, new refrigerators etc will be considered separate assets and have their own depreciation schedule when these are added. Also expenses will be able to be individually expensed as rental expenses. These include:

• Cleaning and cleaning supplies
• Maintenance and related supplies
• Repairs
• Utilities
• Insurance
• Travel to and from the property
• Management fees
• Legal and professional fees
• Commissions
• Taxes and tax return preparation
• Lease cancelation costs
• Advertising
• Real estate taxes
• Mortgage interest

Good luck with this future endeavor and I hope this is profitable to you. Please reach out if you have additional questions. Also please read this article for more information in converting your residence into a rental.

[ Edited 02/02/22| 03:20 PM PST]

​​​​​​​@CORETAX9000

[CORETAX9000]

Thank you, David. Do I have to prorate or reduce expenses that occurred prior to the lease start date since this was a second home the first 9-months of the year?