Partial rental income and expenses in the inherited protery

[hp100]

Mother passed away and inheited a house in Feb. Then rented out about 20% of the house for 6 months and sold the house in Dec.  80% of the house was empty.  I paid the $6000 of property tax.  Total rent in the year was $3000. 

In sked E, I report $3000 as rental income,  but what about the expenses?

Can I report $1200 (one fifth of $6000) as property tax expense ?

[AmyC]

Can you clarify? The treatment is different on1041 for the estate vs your personal 1040. For the 1041, all expenses of the estate are deductible on the return while on the personal return, we need to know if the 80% not rented was used for personal purposes or could have been rented or was not available due to the rental.

See:

Topic No. 415 Renting Residential and Vacation Property

Publication 527 (2020), Residential Rental Property 

[hp100]

Actually mother passed away in Feb 2020 and rented out part of the property in 2020 and 2021.  Mother used to live there untill she passed away.  Instead of keeping the empty house, I rented out about 20% of the property and I did not any tax on the estate since the estate is small.  I filed the 2020 1040 tax with rental income without any expenses and a little bit of depreciation.  I did not file 1041.

For 2021 1040 tax, I thought I might be eligible for expense of property tax.

[AmyC]

 So this is a standard rental property for 2021 with no personal use of the dwelling. Then chapter 1 of Pub 527 applies to you. If you had been able to rent more, you would have. The entire house was available for rent and the whole house was sold. You may be eligible for the full amount and all expenses.  Pub 527 states:

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 can’t 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 isn’t held out and available for rent while listed for sale, the expenses aren’t deductible rental expenses.

See Publication 527 (2020), Residential Rental Property  for full instructions for your situation.

[hp100]

Thanks for the repsonse, I am not sure what was my case.  After mother passed away,  it was empty, I need some one to use the propery while it was on sale for about 2 years.  Finally sold and try to figure out the expense if I can.  I do not have any expense claim except the propery tax.  Rent income was small compared to the high property tax.  

My question in my case, can I use the property tax as expense.  If yes, all of it or only 20%?  I think it is reasonable to use the 20% of propery tax as expense.

[AmyC · Accepted solution]

If you rented the whole house for less than fair rental, you would not list the house as a rental. Since you rented 20%, that could have been a room you rented and tried to rent more. Not knowing any more of your story, the 20% property tax deduction for the 20% rental makes sense if you qualify to claim the rental. Again, please see Publication 527 (2020), Residential Rental Property  for full instructions for your situation.

Begin first with -Did you hold out the whole house for rent? 

[hp100]

I did not want to rent out the whole house, just need someone to stay instead of being vacant while on sale.

Thnks...

[AmyC]

On your rental agreement with the tenant, what did it say? Did it say the tenant was limited to certain areas of the house? or did the tenant have access to the full house and just didn't need? 

[hpaik100]

Limited to certain areas.

[DianeW777]

Based on your information you did not rent this home with the purpose of making a profit.  Assuming this was the intent, here is the information about your rental income and expenses.

Not Rented for Profit  (IRS Publication 527)

If you don’t rent your property to make a profit, you can’t deduct rental expenses in excess of the amount of your rental income. You can’t deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.

Where to report. 

Report your not-for-profit rental income on Schedule 1 (Form 1040), line 8 (other income).

If you itemize your deductions, include your mortgage interest and mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses from your not-for-profit rental activity when figuring the amount you can deduct on Schedule A.

In TurboTax, when you are signed into your account you can enter the income as follows:

1. Click on Federal > Wages & Income.
2. Scroll down to Less Common Income section.
3. Click on Start/Revisit box next to Miscellaneous Income.
4. Scroll to Other Reportable Income Click Start/Revisit.
5. Enter Description and amount (do not reduce the income by the portion of property tax)

Include the property taxes under Deductions and Credits >  Your Home >  Property taxes