Rental Property Deductions for 2020 Property Improvements

[gorilla1969]

My wife and I just purchased a second home in mid 2020.  We did not sell our other property (a townhome which is owned outright/no mortgage) in anticipation of using it a rental property.  We had a renter move into the place on January 1st, 2021.   Prior to renting the townhome, we had the interior professionally painted and cleaned (had not be painted in 15 years).  Unfortunately, the first painted botched the job so we had to have it repainted a second time using a different company.   As such, we spent between $4k and $5k to get the interior suitable for renting the space.  

I'm using TurboTax Premier and it's stating that since it was not rented in 2020, it should be deleted as 'rental' from my return.  However, I've read that cleaning, repairs, utilities, HOA fees, real estate taxes, etc. are deductible when the property is vacant with the intent to rent.  

Please advise and thank you.

[AnnetteB6]

If you advertised the property as available and made it available for rent during 2020 (which you probably did since a tenant moved in the first day of 2021), then the property is considered to be a rental property placed in service.  The date you started advertising it and making it available to rent is the date it was placed in service. 

Expenses that you incurred after it was placed in service can be deducted as rental expenses.  Expenses that you incurred prior to the property being placed in service are considered personal expenses and are not deductible.  However, major property improvements that were made prior to placing the property in service can be added to the cost basis for depreciation.  TurboTax will guide you through this as you enter the details for the rental property.  

When you enter the property information in the Rental Income and Expenses section of your return, indicate that 2020 was the first year you rented the property.  Also, answer the question about having rented the property all year with 'No'.  Then, indicate zero days rented and zero days personal use.  You would not have any personal use of the property unless you actually lived there after the date you placed it in service.  Be sure that you do not check the box stating that you did not rent or attempt to rent the property in 2020.