Can I enter in 100% for "Percentage of time I used this item for this business in 2016" ?

[jh2]

Under the assets section, since my rental property was empty (had just moved out) and mostly under construction during 100% of 2016 (to get ready to rent out) can I enter "100%" for "Percentage of time I used this item for this business in 2016" ?

[Cattlerancher · Accepted solution]

Sorry but no, you cannot claim rental expenses or depreciation until it is actually being advertised for rent. Here are the rules from the IRS publication 527 and a link is provided so you can read up on it yourself.

https://www.irs.gov/pub/irs-pdf/p527.pdf

When Does Depreciation Begin and End?

You begin to depreciate your rental property when you place it in service for the production of income. You stop depreciating it either when you have fully recovered your cost or other basis, or when you retire it from service, whichever happens first.

Placed in Service

You place property in service in a rental activity when it is ready and available for a specific use in that activity. Even if you are not using the property, it is in service when it is ready and available for its specific use.

Example;

You moved from your home in July. During August and September you made several repairs to the house. On October 1, you listed the property for rent with a real estate company, which rented it on December 1. The property is considered placed in service on October 1, the date when it was available for rent.

[jh2]

Thanks! One more question. I currently have "placed into service" as 7/1/16 and it was rented on 8/1/16 but I actually had a showing in 2015. I responded to someone looking for a place to rent on Facebook and showed her the house. She picked another rental unit and I decided to do some renovations. Would that mean the date of the showing (or response on Facebook) was the "placed into service" date ?

[Cattlerancher]

It is placed into service of your rental when you begin advertising the rental (in Facebook) and it's ready to move into. In your example, you started to advertise but changed your mind and did some renovations, so it was not ready to move into so you would have to stop depreciation.