Our house has a mother-in-law suite that we rented. In 2017 we had no renters, suffered water damage, and used it for personal storage. What do I show for 2017?

[DeputyDawg5846]

We rented the attached, one-bedroom apartment for many years. The apartment is attached to the house, but has private entrances and it's own electric meter.  There is a door, lockable from both sides, into the apartment from the front hall of the house, and there is one gas and one water meter for the whole house.  For previous years I used TurboTax Premier and reported income and expenses for the apartment. In 2017 we had no renters, suffered water damage from a leaking roof and a busted water pipe. We used the apartment solely for personal use and stored stuff in it.  It is unlikely that we will have renters this year, and are likely to sell the house later this, or next year.  So far, I have entered no information in TurboTax for our 2017 return suggesting that we have a rental property, but I don't know if that will raise any red flags to the IRS. Is that the correct way to report nothing?

[Arash · Accepted solution]

If the property was available for rent all year then you would be able to deduct expenses such as depreciation and potentially the repairs for the roof and water pipe. These deductions may offset the tax you owe on your other income. However, if the property was not available for rent and you used it for personal use, then you would not deduct rental expenses. If the property was partially used for personal use and partially available for rent, you would pro rate your expenses. 

If you determine that your property was personal use all year and you have no rental expenses to report, you would leave it off your return completely, just like you have so far. 

Please see the below links for more information: 

https://ttlc.intuit.com/questions/3195738-if-a-house-is-not-rented-out-all-year-vacant-the-entire-ye...

https://ttlc.intuit.com/questions/2157026-property-tax-and-mortage-interest-deductions-for-multiple-...