Rental property expenses in year prior to first rental income

[okrandy]

We bought a house in November of 2016 and had expenses in 2016 to get it ready to rent. We received no rental income in 2016.

Since we have no rental income in 2016, states that I should not enter as a rental until 2017.  However, if I do that, how do I deduct the expenses that were incurred in 2016?

[MinhT]

Expenses incurred to get a property ready for rental are not deductible as rental expenses. Rental expenses start only when the property is ready for rental and put on the market.

Improvements are added to the cost basis of the rental home and are depreciated.

[okrandy]

Agreed but these expenses were mainly cleaning supplies, paint, lightbulbs, etc.  More to freshen up, not capital improvements.

[MinhT]

Small repairs and cleaning expenses to prepare the property for rental are not deductible.

[view2]

Amounts paid for work performed on a unit of property prior to placing the property in service are related to the acquisition of the unit of property and, therefore, must be treated as an acquisition cost. The temporary regulations do not incorporate a rebuttable presumption in this rule because there are very few, if any, costs to which the presumption would apply. Moreover, a rebuttable presumption is more subjective and difficult to administer. Thus, the temporary regulations retain the bright-line rule that requires a taxpayer to capitalize costs that are incurred prior to the date a unit of property is placed in service.

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