How to handle depreciation of 2 year renovation of 2nd house for personal & short term rental

Forum|Forum|4 years ago
February 4, 2022
2 replies
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We bought a 2nd home in February of 2020 and did not get it renovated in time to live there part time or to rent it out during 2020. I took a Section 179 deduction in 2020. During 2021 due to an unforeseen circumstance, the renovation did not get finished and there were no short term rentals but we lived there for 36 days while we worked on the house. Can I take a carryover Section 179 deduction for 2021?

AmeliesUncle

Level 15

If it was not available for rent in 2020, Section 179 was not allowed, so there would not be any carryover.

Bje18Author

Level 2

Thank you.

Carl

Level 11

We bought a 2nd home in February of 2020 and did not get it renovated in time to live there part time or to rent it out during 2020. I took a Section 179 deduction in 2020.

If the property was not at least "available for rent" in 2020, then absolutely nothing concerning that property should have been reported on SCH E in tax year 2020. You can't claim any rental expenses until the property is at "least available for rent", and depreciation of any asset does not start until the day the property is available for rent.

Therefore, the only thing you can claim on your 2020 tax return is property taxes and mortgage interest as an itemized SCH A deduction, and that's it. All the other stuff just has to wait until the tax year the property is available for rent. Understand you'll be able to claim it. Just not until the tax year the property is actually available for rent.