When a property is vacant due to a fire from a tenant, can i still deduct my expenses in the duration of repairs while receiving rent loss income?

[ggwe390956]

We rented out our property in August 2022. 
The tenant lived there for a month and burned the house down. 
between lease date to lease termination is 56 days. (we did get rent for 2 months from the tenant)

For the rest of the year (Oct, Nov and Dec) we received rent loss income from our insurance.

I know that rent loss income from insurance are taxable, so I treated it like a normal income.

However when asked how many days the property was rented.. is it 2 months (lease date commence till termination) or 5 months (including the rent loss income duration).

If i had recorded rental income for 5 months, and only record expenses for 2 months, it's not apple to apple. 

Is there any IRS Code on these?

[maglib]

@ggwe390956  So sorry this happened. Yes, you can continue to claim your expenses if the property is temporarily idle and you plan to rebuild and rent it in the future.  Claim it was rented all year regardless.

https://www.irs.gov/taxtopics/tc515 will be helpful to you to claim losses related to the casualty if they are not reimbursed by insurance.  

This is rental property rules.

https://www.irs.gov/publications/p527

[Carl]

The fire does not change rental classification of the property. So long as you intend to rebuild and continue renting, it can stay classified as a rental.

You say you got 2 months rent from the tenant, and you also got money from the insurance company for loss of rent while the property was vacant. So your days rented is more than just the 56 days it was occupied by the renter.

Typically, insurance will cover loss of rent generally up to 85% of the monthly rent you charge, for anywhere from 6 months to a year. So the time the insurance paid for is also counted as days rented. Remember, the property does not have to be occupied in order to be considered as rented; and it was rented to the insurance company for at least some of the time (if not all the time) while the restoration work was going on - possibly even longer.

Vacant days do not count against you. However, personal use days do count against you. If you intend to rent the property out again after the repairs/rebuild, just declare it rented "the whole year" and you'll be fine.