It depends. If the property was available for rent in 2024, then you can add the rental to your tax return for 2024. However, if the rental was not available for rent until 2025, then all expenses must wait until you prepare your 2025 tax return. The information below will be helpful for when you are able to use the rental unit.
That being said, when it became available and listed for rent you can do the following. The purchase price, purchase expenses (noted below), capital improvements to the structure would be included in the cost basis for your rental unit asset. Use the property tax assessment at the county or city to figure out what portion is land, if applicable, and the portion that is for the building structure itself. Enter the full cost and then only the land when asked.
Depending on cost, the new lighting fans and bedding, patio furniture and land scaping may be expenses under the DeMinimis Safe Harbor (DMSH) and capital improvements might qualify for the Safe Harbor Election for Small Taxpayers (SHESTs). Review the information in the link below.
- What can I depreciate or expense with the business safe harbor method?
- Rules for the SHESTs method for capital improvements:
- Your gross receipts, including all your other income, are $10,000,000 or less.
- Your eligible building has an unadjusted basis of $1,000,000 or less.
- The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits:
- 2% of the unadjusted basis of your building or
- $10,000
Either or both safe harbor elections would be entered in the rental activity using Miscellaneous expenses if you choose this method.
Purchase Fees:
Government Recording and Transfer Charges
- Recording fees
- Title Charges
- Lenders Title Policy
- Settlement or Closing Fee
- MLC - Municipal Lean Certificate
- Title Exam
- Owners title Insurance
You can include these closing costs and add them to the cost basis of the property as noted above.
Loan charges - Loan charges are part of the loan, not cost basis
- Application fees
- Lender fees
- Appraisal Fee
- Inspection Fee
- Condo Questionnaire
- Credit Report
- Debt Report
You can't include in your basis the fees and costs for getting a loan on property.
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