Are property tax, HOA regular monthly dues and utilities paid for a condo (while vacant and listed for sale) eligible to elect to capitalize under IRC Section 266?

[greenjeehan]

If not, is there any way that I can claim the above expenses to get any tax benefits (other than itemized deduction for property tax)? The condo was rented to tenants until mid October of 2024, and thereafter it was vacant and listed for sale (but was not sold in 2024 yet). I'd like to know whether I can elect to capitalize under IRC Section 266 the above expenses paid for the period when the condo was vacant (no personal use at all) and listed for sale.

[PatriciaV]

It depends on the status of your Rental Property while it was listed for sale.

If the property was available to be rented (even if you had listed the property for sale), you would report those costs (including mortgage interest and depreciation) under Rental Expenses.

However, if the property was not available to be rented (or you had no plans to rent it again), any holding costs you incurred before you sold the property increase the basis of the property and reduce any gain on the sale. You can enter these costs as a separate Rental Asset (improvements), although no depreciation expense will be reported for additions in the year of the sale. (See IRS Pub 527 - Vacant Property.)

In this situation, the mortgage interest would be considered Investment Interest Expense. This is an Itemized Deduction on Schedule A.

Any repairs or costs needed in order to close the sale may be included in Selling Expenses.