Rental property expenses

[Tom2571]

I have a second home that I rent out. I didn't rent it at all during 2023 as I had some replumbing and remodeling to do. I'm not seeing how or where to claim these expenses. I didn't receive a 1098 this year because it wasn't rented out so there was no income or payment to my property management company. Turbo Tax is telling me to delete it as a rental for the year, but it still isn't showing me where I can claim these expenses. Can you help me out here please?

Also, I see on my mortgage entries, it isn't asking for my homeowners insurance costs this year. I take it this is no longer a deduction?

Thank You,

[Spino]

In this case, you ARE renting your house out, because it is being held for rent, even though you have no income in the tax year. However, be careful that you are not residing in the home, because this could be disqualifying for it to be considered a rental. If you are only staying in the home for convenience while restoring or maintaining the house for rental, do not count these days as living in the home. You are there temporarily for work while continuing to reside in your regular residence....

Ultimately, you want to read the IRS guidance and follow that. TT is just trying to get you there more better faster, but what you are actually doing is filling in IRS forms, and that's where you must tell the truth....as intended by the IRS on the form.

[Spino]

It's a little confusing when you say "second home." If it is your second home and you only rent it out some of the time, read the IRS guidance very carefully about what you can deduct. Don't jeopardize your status with the IRS just because you wish you could deduct something you can't! If I told you anything else...I'd be leading you astray! I wouldn't want to do that 🙂

[Tom2571]

This is a second home that I have rented out for years. I have not stayed in this house at all and it is in a different state. TT makes me list it as a second home as I do not rely on the income of this house and I do not do this as a business. This is the only house I have that is a rental. I have hired a handyman/contractor to perform some repairs and remodeling on the house. I usually get a 1098 from my property manager for income received from this property. However, because I didn't rent it at all during 2023, I didn't receive a 1098 as there was no income, but it is still a rental. I have always in the past been able to deduct any repairs needed (ie. water heater, AC unit, plumbing, etc.). Since I don't have a 1098 this year, TT is making me remove this as a rental, so therefore it won't let me claim the repair costs incurred during the year that it remained empty but was being repaired. So my question is, how/where can I go on the tax form to claim/deduct these very expensive repairs I had done? Or can I claim them on my 2024 taxes once the house is rented out again. 

[DianeW777]

It depends. If the house is not yet available for a profitable rental then you should wait for 2024.  The capital improvements will be added to the cost basis in 2024 as a new asset by itself.

Right now if it's being remodeled you can take the expenses however if you indicate it is  in a 'Not for Profit' state then your deductions will not be allowed since you have no rental income. You are not allowed to deduct expenses.  You will add the rental back to your return in 2024, so keep all of your documents and worksheets in your file because they will be entered with the same original dates, cost, and date of original rental activity.  The new assets will begin in 2024 when the property is available for rent, not necessarily when it actually gets rented. 

•  IRS Publication 527

@Tom2571