Any tax advantages to a vacant rental property?

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Old 12-05-19, 09:58 AM
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Any tax advantages to a vacant rental property?

Greetings,

I've been keeping busy all autumn repairing and refreshing a rental property I recently purchased (and getting good advice in another parts of this forum). I cannot foresee getting any renters until early 2020. That said, are there any tax advantages I could claim for 2019? I have been spending a lot on repairs and saving receipts. Is this sort of thing deductible? A friend told me that I can only deduct such expenses from rental income, and that any expenses prior to such income cannot be deducted.

Thanks!
 

Last edited by VeldesSee; 12-05-19 at 10:02 AM. Reason: grammar
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Old 12-05-19, 10:32 AM
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Could you tell us what state you're in? Tax laws vary from state to state and sometimes even city.
 
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Old 12-05-19, 10:41 AM
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Ah yes, I am in New Haven county, Connecticut.
 
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Old 12-05-19, 01:06 PM
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IMO you ought to contact a tax accountant or tax lawyer, they'll know more than any random person on the internet. They might even answer your question for free on the phone although it would be a good idea to have more comprehensive conversation to cover all the other aspects of being a landlord.
 
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Old 12-05-19, 01:39 PM
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Well, I intended to do so based on what kind of info I could find on the internet. If there is an advantage, I'd use a tax accountant to find the benefit. If not, I'd file the EZ form as usual, since nothing should have changed. Personally, I dispute my friend's assertion, since investment property is investment property and gets different treatment than a primary residence. I'll keep searching for clarification on this.
 
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Old 12-05-19, 01:54 PM
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For me there is no "benefit" to a vacant property. You have no income so there is no income to claim but you can claim expenses incurred on the property. Again you have to talk to a professional in your area that knows your laws. For just one property vacant for a couple months it might not be worth the cost of a professional though.

It can be a slightly gray or difficult to understand area. If the house is vacant you have not provided a service to anyone so you can't claim a loss for something you didn't do. If the house was occupied and they didn't pay you did provide a service but were not paid so that might be considered a loss. Your tax professional could tell you if a court judgement is required to claim the loss.
 
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Old 12-05-19, 02:15 PM
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Okay, thanks for the scenarios.
 
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Old 12-06-19, 06:41 AM
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You can deduct any property related expenses from the time you make the property available for rent. Expenses prior to that to get the rental property in shape to rent need to be capitalized as part of the property and depreciated over their useful life. Probably a good idea to have a professional do your tax return. There is an IRS Publication on residential rental property that you can take a look at. It's Publication 527. You can google it.
 
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Old 12-06-19, 10:49 AM
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Thanks. In Pub 527 it says "Pre-rental expenses.You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent."

Therefore, one has to make it available for rent but not actually have a renter in it yet. It states:

"For example, on April 6, you purchased a house to use as residential rental property. You made extensive repairs to the house and had it ready for rent on July 5. You began to advertise the house for rent in July and actually rented it beginning September 1. The house is considered placed in service in July when it was ready and available for rent. You can begin to depreciate the house in July."

That said, I wonder what evidence for availability for rent is needed? A contract with a realtor, an ad in the paper, a sign on the front lawn?
 
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Old 12-07-19, 08:01 AM
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Anything you spend on the property after it is available for rent can be deducted from total income received for the year. You may even come up with a net loss for the year but I wouldn't recommend it, especially for more than a year.
 
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Old 12-08-19, 05:11 AM
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Something to consider is that your insurance company may not cover the risk of an unnocupied dwelling.
Here for normal house insurance it can only be unnocupied for a limited amount of time.
It may not be possible for you to have a house empty under a normal house policy and special coverage my make your plan impractical.
 
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Old 12-09-19, 08:02 AM
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Thanks, Greg. My insurer is aware of the unoccupied nature of the house. He was the only one in town to agree to insure it that way. Two others refused to do so, even though we're a low crime area. He told me to inform him when it became occupied, in order to change the policy terms.

Concerning Mark's comment, I wonder if I can apply for accelerated depreciation for the first year, in order to recoup some of the expenses incurred for bringing the house up to par? A guy who marketed replacement roofing to me and owns several rentals told me about it, but I must have missed most of the details.
 
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