Vacant Rental Property Expenses

[madmanc20]

Mother has moved out of her home in 2/2017, we are out of state and took 3 years to clear it out, repairs, and light improvements and finally rented out in 11/2020. We didn't make any actual tenant showing effort until late 2020 but of course did much research on the rental market while getting the property ready.

Current 2020 tax plans are to

- Claim all taxes/repairs in 2020 on Sched E expense

- Add all 2017-2019 expenses into depreciation basis.

Are there any ways to include 2017-19 expenses into as expense in someway to offset future rent income? House will have high net income as it does not have mortgage interest expense. Suspended loss rental expense would yield benefit much sooner than 27.5 year depreciation schedule.

[M-MTax]

Sorry to say you should've asked this question 3 years ago. Now the only thing you can add to your basis for depreciation are improvements that were made while getting the home ready to rent. There are expenses like property taxes that you could have added to your basis but you needed to make an election in the year those expenses were paid on the tax return for that year. It's too late to do that now. Another thing is you could've tried to rent the home AS IS right after your mother moved out no matter what the condition. If you had made it available even though it might have been a wreck you could have deducted those expenses. 

[madmanc20]

@M-MTax 

Thanks, thats what I suspected. Can't amend past returns to accumulate the expenses? I guess might increase audit risk?

Didn't realize could file schedule E for suspended loss without making an effort to advertise+show the property for rental. IRS directions leave it quite ambiguous. Home is on a high tenants right region (San Francisco), didn't want to take the chance to have lower end renters so opted to wait until home condition was improved.

[M-MTax]

Understood about the lower end thing....doesn't end well most of the time.....but if you advertised it as ready and available for rent then you could've deducted rental expenses even without a renter. You can't amend because this election had to have been made timely which means when you filed your return for that year.