De Minimus Safe Harbor

Forum|Forum|5 years ago
March 4, 2021
17 replies
82 views

De Minimus Safe Harbor - Had no rental income 2020. But had renovation expenses & improvements. Sold property June 2020. Deducted rental expenses for repairs, condo fee, etc. Added cost of improvements to cost of property (fully depreciated). Do I still need to printout & sign Rental Real Estate Safe Harbor Statement?

Best answer by PattiF

From IRS Publication 527, if the property is for sale and for rent at the same time, the necessary expenses can be deducted.

There have been numerous discussions in TurboTax about this issue for the past few years. The general con-census is that if the property is for rent and for sale, then the expenses can be deducted as rental expenses.

Anonymous_

Level 15

Was the property available for rent in 2020? If not, you cannot deduct typical rental expenses.

Carl

Level 11

Safe Harbor for what? I'm not clear on that. If your property improvements were done between the time the last renter moved out and the closing date of the sale, none of your property improvements are depreciated. Of course, they still add to the cost basis. But what are you claiming "any" safe-harbor on, since there's nothing to depreciate? Maybe you listed the property as "available for rent" after the improvements were completed, and before you sold the property?

Even so, claiming a safe harbor deduction makes no sense, since you'd risk paying more tax on more recaptured depreciation in the year of the sale.

TL1949Author

Level 2

Carl= Thank you so much for helping me in July 2020 towards obtaining estimate of 2020 taxes.

Now that I am in final stages of 2020, last question.

FACTS= My rental property was renovated & completed last part of 2019 but always available for renting. Jan 2020, rental fully available & in move-in condition, advertised for rent or purchase up to sold date. Although, rental income -$0-, improvements & repairs (after renovations) occurred. Sold fully depreciated property June 2020.

2 QUESTIONS= Can I utilize the Safe Harbor option which appears to allow expense of improvements if $2,500 or less to expense? All improvements individually were $2,500 +/-. Bottom line, can't property be treated as active rental as long as it is advertised for rent or purchase?