Tax Year Prior to 2020: Where to enter Depreciation and Expenses for Rental Property that hasn't be rented or generated any rental income.

[bttrainingyard]

In July 2019, I purchased a rental property out-of-state. I spent the rest of the year (July-Dec 2019) repairing and improving the house. It wasn't rented. It still hasn't been rented because it's still being repaired. I have put money into the repair and improvements.

Under Rental, (schedule e) you can only enter deduction and asset information if you actually "rented" the property and generated "rental income". This isn't my situation because the property still wasn't ready to be rented out (still isn't in even now Feb 2020).

Where do I deduct the cost of the improvements by depreciating it over a period of time?

Where do I enter all my expenses and repair cost, if this situation even applies to that?

Where "exactly" do I enter my depreciation deduction/ asset in TurboTax (Mac Download)?

**I need it clearly stated and pointed to the exact location in Turbo Tax (Mac Download)**

[DianeC958]

You begin depreciation once you place the property in service.  This means it is ready to be rented.  Until the property is ready and available to rent your cannot depreciate it.

You can deduct the property taxes and mortgage interest you paid for the rental property as an Itemized Deduction as a second home until the property is ready to rent.

Link to Tax Deductions for Rental Properties

[bttrainingyard]

But as far as the repairs I've made, can I expense those as Itemized Deductions ?

Some of the work are repairs, some are improvements.

What can I actually deduct for my taxes this year?

[VictorW9]

What you need to do is capitalize all the expenses incurred as improvements since the property is not available for rent at the moment. First, you have to get the HUD-1 document where you could find details of the purchase of the property. This will be the initial depreciation basis but make sure the land is not set up to be depreciated. Then you will also include the improvements you are making on a separate line and set the amount up to be depreciated over the same number of years, that is 27.5 the same as the building. You will start the depreciation when the property is ready and available for rent.

Here's how to enter the depreciation:

Enter your rental property information through the TurboTax guided questions (or choose edit rental property if property is already listed) until you come to a screen that is titled, Your "rental property name" rental summary. You will enter your rental property house here under "assets/depreciation".

[bttrainingyard]

The property won't be available to rent until March 2020. The property is still currently being worked on. It is not ready to be rented. Since 2019 has already passed and I paid money to have work done on the property, how do I deduct my expenses?

Some of the work done were repair some were improvements.

If I am not renting it, I can't enter it as a depreciation in 2019. Can I deduct my repair work as expenses? Does it make sense to do it that way?

[VictorW9]

As par IRS rule: "If you hold a 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."

[bttrainingyard]

I don't have any rental income to deduct so I know I won't be able to deduct it.

But your saying you can deduct ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant.

Where do I enter the depreciation aspect of it on in Turbo Tax, if my rental property hasn't generated in any income?

[VictorW9]

Enter your rental property information through the TurboTax guided questions (or choose edit rental property if property is already listed) until you come to a screen that is titled, Your "rental property name" rental summary. You will enter your rental property house here under "assets/depreciation".

[bttrainingyard]

You can only get to this screen IF your rental property is listed and generating income. This isn’t my situation. 

Currently, my property ISN’T available to rent. It is STILL being repaired and still having improvements made to it.

I need to know where I can enter assets/depreciation amounts when my property hasn’t been listed or rented on Turbo Tax guided questions?

Where do I enter repair expenses for the property on Turbo Tax guided questions?

[ColeenD3]

There is no place to enter these amounts.

Your property is not an active rental right now, nor is it available to rent. The amounts for any improvements are added to the basis. You can't deduct any expenses until the house placed in sevice, meaning it is ready and available to rent.

Placed In Service

[bttrainingyard]

So I just read over the Placed in Service documentation on the IRS website.

It doesn't say anything about NOT being able deduct expenses. But what you're saying is, because the property is not ready actively renting or not available to rent, that I can't deduct any of the repair expenses until I actually have it available?

If this is the case, then all the repair work I did in 2019, I won't be able to deduct until 2020 tax year, because I plan to have the property in the rental market next month?

Please help me understand

[JamesG1]

“You begin to depreciate your rental property when you place it in service for the production of income.” See When does depreciation begin and end, IRS publication 527.

Your amounts paid for any improvements to the rental property in 2019, and

Your amounts paid for any improvement to the rental property so far in 2020,

are added to the cost basis of the rental property.

You will deduct expenses including the depreciation of your rental property after the rental property is placed in service for the production of income.

[bttrainingyard]

So, if I had repair expenses for the year of 2019. I can still deduction them in my 2019 taxes, even though its now 2020, as long as my rental property is place in service in year 2020?

[BarbaraW22]

No, you will not be able to deduct your expenses for repairs and improvements in 2019. This is because your property is not ready and available to rent. In other words, you have not made it available to be rented yet because you are still repairing and making improvements to the property. You stated that the property will not be available for rent until March 2020. 

Per IRS Publication 527, "you place property in service in a rental activity when it is ready and available for a specific use in that activity."

You will need to keep a record of all of the expenses and repairs you have made to the property. All of those expenses will be added to the original cost of the rental property. In 2020, when it is available to rent, the cost of the property plus all of your expenses and improvements will be added together and that total will be your basis in the rental property. This basis will be used to calculate your annual depreciation deduction for the property. The first year you will be able to claim a depreciation deduction will be in 2020 when the property is ready and available to rent. Rental property is generally depreciated for 27.5 years.

@bttrainingyard

[bttrainingyard]

When you say, The first year you will be able to claim a depreciation deduction will be in 2020 when the property is ready and available to rent.

Are  you saying, once I put my property in service, I have to wait until I file taxes next year to claim the depreciation deduction and repair expense, OR, are you saying that once I put my property in service (March 2020), THEN I can start depreciation deduction and expenses, right now?