Rental purchase not placed in service until following year

[snathan99]

I have a rental property purchased in 2024 and working on repairs and capital investments. Also paying taxes, insurance and mortgage starting 2024. It will be placed in service sometime in 2025. Do I claim expenses in 2024 or wait until 2025 return?

[AnnetteB6 · Accepted solution]

Until the property is advertised and available to rent, it has not been placed in service and is not considered to be a rental property.  Since that will not be done until 2025, you will wait until your 2025 tax return to claim any rental expenses.  

In the meantime, on your 2024 tax return you can claim property taxes you paid as part of Schedule A Itemized Deductions.  If the property would qualify as a second home for you, you can also claim mortgage interest on your primary residence and a second home.  The insurance cost is a personal expense for 2024.  Capital improvement costs will be added to the basis of the property when it is placed in service as a rental.