When the portion of my property that I rent is vacant (and listed for rent), can I still deduct the rental portion of utilities such as electricity, internet, etc?

[mrd01]

Three part question.

I rent out a portion of our property and this year it was vacant for several months as we looked for a tenant. I continued to list the property so it's my understanding that I can deduct depreciation, taxes, insurance, etc.  However, can I also deduct the rental portion's share of utilities, such as electric, internet, etc?  The rental was vacant in this time so no tenants were really using these utilities, but if it is acceptable, I would of course prefer to deduct it.

Typically, I caclulate the portion of our expenses for the rental based on number of people (ie, we are two adults, if there are two adults in the rental, I assign 50% of expenses).  But this year, if it's vacant for several months, it seems I couldn't use this rule.  Would I need to use the square footage rule instead and assign percentage based on square footage, and, if so, do I need to be consistent through the whole year with the method I chose? Or can I go back and forth?

Third, a TurboTax technical question. When TT asks me if the property was rented all year, am I supposed to say 'yes', since it was available for rent and we were looking for tenants - and 'no' would generate a partial-year rental?  Or should I say 'no'. 

Many Thanks in advance.

[pk · Accepted solution]

Allocation of expenses between personal use and rental is allowed -- just make sure that you have details and logic to back this up incase of an audit-- should not be an issue as proposed by you.

Rental expenses when not occupied but advertised for rent is valid expense for rental.

When asks if the property was rented -- it includes periods when unoccupied but actively seeking rental.

Hope this helps

[mrd01]

Thank you!  And a follow-up question. Can I change my allocation method within a year?  For instance, if I typically allocate by the total number of people living in the property overall (which yields a 50% allocation to the rental portion), can I switch to square footage allocation when vacant, and then switch back again?  Alternately, can I keep the 50/50 allocation when vacant, based on the fact that I am actively seeking rental for a place that comfortably takes two, even though there is no one there?

Allocation by people is the most advantageous to me because the square footage is not 50/50.  But I'm not sure if it is allowable to switch back and forth like this or to allocate by people if vacant.

Thanks again.

[pk]

I am not aware of any rule that prohibits switching of allocation criteria --- just be logical ( i.e. a reason as to why and how you allocated the expenses) and keep your records -- so you can show your logic if audited. Good Luck

[mrd01]

Thank you!