Selling rental house which was vacant last year

[RuffyK]

Hello,

This year, in January of 2025, we sold our rental property. The property was vacant the entire year of 2024. The last time it was rented was January through September of 2023. I did not convert it to personal use, or do anything else in preparation to sell it in 2023, as we thought we would be re-renting it. What is the best way to enter this property into the 2024 TT program, which will make it easiest for me to process when I do my taxes in TT 2025?

Thank you!

[PatriciaV]

If you intended to retain the property as a rental last year, you can claim any expenses you incurred to maintain the property. This includes depreciation, property taxes, insurance, and simple repairs. Even though you didn't have a tenant, the IRS considers this a "vacant" rental property, as long as you intended to use it as a rental when you found a tenant.

Per IRS Pub 527 - Vacant Property

Vacant rental property.

If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. However, you can’t deduct any loss of rental income for the period the property is vacant.

In TurboTax, report as "rental days" the number of days the property was available to be rented, even if you had no tenant. If you report zero rental days, the program will delete all forms and schedules related to the property. Since you sold the property in January, you will need those records to report the sale properly next year.

[RuffyK]

Thank you @PatriciaV.

If at some point during 2024 (say Sept 1) we decided to not rent it out, but instead do a major remodel in preparation for selling it, how should I enter that into TT?

As a related data entry question within TT: how would converting the rental to personal use on Sept 1, differ from not converting to personal use, but instead indicating that it was available to rent up through Aug 31 [i.e. 244 days]? 

Do these two methods assign things differently in TT, and would one or the other method make it easier when I sell the house in 2025?

[ThomasM125]

Once you started preparing the property be sold, you would keep records of the improvements to the property as you can add them to its cost to be deducted from the eventual sales proceeds. Carrying costs such as mortgage interest and property taxes however would not be deductible during this time as rental expense but would be available to be deducted as itemized deductions if that would benefit you.

Once the property is no longer rental property, you can only deduct mortgage interest and property taxes as itemized deductions, as opposed to rental expenses.

I don't see either option making the reporting of the sale of the house easier.