Repairs and Maintenance for Sale of Rental Property

[Mcb050032]

Made repairs and maintenance in order to help sell the rental property. The property sold a couple months after - can I incorporate these as "selling expenses" ? The property was rented earlier in the year, but these expenses were made after to help facilitate the sale.

[tagteam]

Fix-up and maintenance expenses would not be deductible as selling expenses (or otherwise) unless the property was held for rental use when the expenses were incurred (i.e., if the property was taken out of service as a rental, then the expenses are not deductible).

[Mcb050032]

Thanks for the reply - What is considered taken "out of service"? The last day rented or the closing date? It was always rented, but the few months before were vacant.

[Mcb050032]

Not sure on this situation, any further thoughts on this? Thanks!

[tagteam]

Was it available for rent?

[tagteam]

Note that the property can still be available for rent during the time it is for sale.

[Carl]

If you did not advertise the property as available for rent (i.e.; for sale or rent) then the property should be taken out of service and converted to personal use one day after the last renter moved out. Any expenses incurred after that date (i.e.; maintenance expenses) incurred after that date are not deductible on the SCH E.

Typically what I see with a "for sale or rent" situation, is the rent is set high enough so as not to attract potential tenants, in favor of potential buyers. That way, the requirement for the property to be "available for rent" is met.

[Mcb050032]

So say the rental wasn't advertised as being rented beginning 1/1/23 and the closing of the sale of the rental property was on 11/1/2023. The rental use should be converted to personal as of 1/2/23 - do I do this by entering 1/2/23 as the disposition date in the depreciation detail even though the sale was 11/1/23?

Also, any rental expenses from 1/1/23 - 11/1/23 would not be reported on Sch E. Would mortgage interest and property tax go on Sch A? Also, if there are any expenses that qualify as "selling expenses" would be able to reduce selling price?

[tagteam]

"Advertising" could be as simple as telling the listing agent for your property that you would accept a tenant (renter) during the time the property is listed for sale.

[Mcb050032]

I see, seems like a grey area. In that case I would continue to run the rental expenses through Sch E as normal? 

[tagteam]

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@Mcb050032 wrote:

I see, seems like a grey area. 

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Indeed it is, but there is no requirement that you formally advertise the property for rent (e.g., place an ad in some publication or a yard sign).

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@Mcb050032 wrote:

In that case I would continue to run the rental expenses through Sch E as normal? 

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Yes, provided the property was available for rental use (a very loose standard).