Rental expenses prior to placing property in service.

[silviagmorales]

Even after reading publication 527 it is not clear to me how these expenses would be treated.  Home purchased late Nov 2023 for purposes of renting it.  It will be available for rent starting in Jan 2024 as some repairs are being done.  I understand expenses prior to the in service date are not deductible, but would they be added to basis?  Here is the list of costs I would need advise on classifying them.    Again this would be for costs incurred in the month of December 2023 prior to the property being available for rent on Jan. 1, 2024.

1. Mortgage interest

2. Property taxes

3, Repairs (plumbing approx $1K)

4.  Fire alarms

5.  Other small repairs 

6.  New Refrigerator $600

7, Remove old fence and install new one $3K

Would any be deductible?

For those that would be capitalized, would they be added to the basis of the home and depreciated over 27.5 years?  Or would they follow the depreciation convention for the respective appliance/improvement?

[Anonymous_]

Mortgage interest and property taxes would be separate, itemized deductions subject to limitations. However, you may be able to make an election to capitalize (add to basis) these charges pursuant to Section 1.266-1.

See https://www.law.cornell.edu/cfr/text/26/1.266-1

[Anonymous_]

If the other improvements, repairs, et al., were all part of one large remodeling project, you can add the total to your cost basis and capitalize that entire amount over the 27.5-year period.

[tigerre]

Just a thought for future situations: advertise it for rent as soon as you acquire it. If taxes are paid at closing, advertise it the day before it closes. Put a sign in the yard. Take a dated photo. Post it somewhere, anywhere. The day title is processed, it is for rent, so those taxes can be deducted. Will be a bit troublesome, and probably nobody will rent it til you are done, but you can claim virtually all of those expenses in the year work was done. If people show up, show it and take applications.  Advertise it for what it will be worth when you are done, but they can move in early if they want or need to. If someone does rent it, you just do the work while they are there. I'm not an expert, but it seems like that should work, if you meet the qualifications.

[Anonymous_]

Good advice, @tigerre