turbotax icon
turbotax icon
turbotax icon
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

Rental property vacant when listed for sale

I bought condo in 2012, lived there till June 2015. I rented it for 2 years till Aug 2017. In May 2017 I listed it for sale. Since I wanted to sell it, I didn't rent it or advertise in any form to rent it. When I first listed it for sale in May 2017, it was still rental as the lease had not completed. But the property didn't sell in 2017. After the lease expired and my tenant moved out, my condo was vacant from mid Aug 2017 till end of the year. Is the property still considered rental property? Do I report the income and all the mortgage interest, taxes etc in the rental income section? 

Connect with an expert
x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

8 Replies
Coleen3
Intuit Alumni

Rental property vacant when listed for sale

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 cannot deduct any loss of rental income for the period the property is vacant.

Vacant while listed for sale. If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses.


Rental property vacant when listed for sale

For "Vacant while listed for sale", where you are allowed to deduct the ordinary and necessary expenses, etc., can you tell me which Form that is entered on or which screen in TT prompts that information to be entered? Thanks!

Carl
Level 15

Rental property vacant when listed for sale

@Reds70 this thread is from 2018 and pertains to the 2017 tax year. Please start your own thread with your specific and explicit situation. Tax laws have changed dramatically and extensively since this thread was originally started back in 2018.

Rental property vacant when listed for sale

Thanks Carl - I'm happy to start a new thread but just so you understand where I was coming from, I was referring to what Colleen3 had posted: 

 

"Vacant while listed for sale. If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses."

 

That exact same wording is still included in Publication 527 for the 2019 Tax Year. So I'm a little confused as to your comment about the laws having dramatically changed.

Either way, I'll post my own thread if that's the way this works. Just joined so still learning the ropes.

Thanks,

Dave.

ColeenD3
Expert Alumni

Rental property vacant when listed for sale

The bottom line is that the property has to be available for rent to be able to deduct expenses. In each case, Pub 527 refers to "available for rent".

 

Also from Pub 527: 

  • Pre-rental expenses. You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent.
  • You may only deduct expenses from the date it is placed in service and available to rent. Any assets you purchased prior to that date are added to the building and depreciated as one asset.
  • Vacant while listed for sale. If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses.

Rental property vacant when listed for sale

Thanks Coleen.

 

Appreciate the follow-up. Agree with what you've said - the expenses in-between the rental period finishing and the property being sold can't be deducted as rental expenses, unless the property was available for rent.

 

In the last couple of days, I have done some research and talked to some people at TurboTax and the consensus seems to be that those expenses can still be deducted, just not as rental expenses - presumably as Selling Expenses. Unless of course, they are improvements in which case they are added to the Basis.

Thanks,

Dave.

Carl
Level 15

Rental property vacant when listed for sale

@Reds70 this whole thread is basically screwed up, because it originated in 2018 or before, and the original starting post pertains to 2017 taxes or before. So that's why it's hard to follow the "facts" for a add-on post such as yours without getting confused.

Basically, if the last renter moved out in 2019, then leave well enough alone and do not convert the property back to personal use. You'll then report the sale in the SCH E section of the program and your life will be a whole lot simpler and easier.

If the last renter moved out in 2018 or before, and you did not so much as advertise the property for rent and had no intention of renting the property between the time the last renter moved out, and the date of the sale, then you need to convert the property back to personal use in the first full tax year the property was no longer available for rent.

So technically speaking, if the property was no longer available for rent on/before Jan 1, 2018 then if you didn't indicate that already on your 2018 return, you'd need to amend your 2018 return and convert it to personal use with an effective conversion date of 1/1/2018. The issues with doing this are multiple.

1) Since you'd be amending the 2018 return, if you used the online version to complete your 2018 return, you get to jump through a lot of hoops having to download the 2018 CD version of the program, install it on your computer, then download your .tax2018 file to your computer and amend from there.

2) Since an amended return can not be e-filed (the IRS says so) you then have to print, sign and mail it to the IRS. To top that off, since amended returns are processed by hand, it can take 16 weeks or longer for it to be processed.

3) You can not even start your 2019 tax return until you have completed amending your 2018 return. That's the only way possible to ensure you import the "CORRECTED* data from your amended file.

4) If using the online version of the program for 2019, then you have to pay attention to detail so that you import your 2018 data from the amended .tax2018 file that physically resides on your computer, and not from the original .tax2018 file that resides in your online account.

5) When you go to e-file your 2019 return, it will be rejected because it will be using the AGI from the amended return that the IRS has not processed yet. So you will have to take physical action to change the 2018 AGI the program is asking for in the e-file process, to the original AGI in the unamended .tax2018 file that resides in your online account.

If the last renter moved out in 2017 and you did not advertise after that, then you get the pleasure of amending your 2017 return to convert the property to personal use. Then you get to amend your 2018 return to remove the property entirely from that year. Then both amended returns have to be printed, signed and mailed to the IRS each in a separate envelope.

Welcome to your nightmare. 🙂 The best way to handle this is to only concern yourself with one tax year at a time. You can't even start your 2019 return until you've completed amending the prior year returns as far back as needed.

If you used the CD/Desktop version of Turbotax do to all those prior years returns, then it's not so bad. Instead of a nightmare, it's more of a bad dream.

 

 

Rental property vacant when listed for sale

@ColeenD3 It has the same net outcome if you say yeah this was available for rent and no it was not.  If you say yeah it was available for rent while selling then the expenses go on your schedule E.  If not then they would go on your expenses to sell or part of the "cost to sell" either way you get them to lower your tax liability they do not just disappear.  After all it is a business and those are liabilities not income so they go somewhere not up in smoke.  You just have to be careful not to double dip like yeah these are rental expenses because while selling it was available for rent and these were also cost to sell items.

Manage cookies