I have an investment property with an investment loan that was vacant for a few months while I fixed a bunch of issues and got it rent-ready. During that time I was still paying the mortgage, taxes, and insurance.
My question is: can you deduct the mortgage interest and other holding costs during that vacancy, assuming the place was intended to be a rental the whole time and the work was to make it rentable (not a major rehab)?
Just trying to understand how this is typically handled and what others have seen in practice. Appreciate any insight.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
9mo
Was it rented out before the vacancy? if so then obviously. Was it your primary home before the vacancy? Then probably not.
If neither of those are true then almost certainly. I don’t think you’d have to capitalize them like you might any pre-rental repairs/capex. If this is the case I would expect your tax guy to say yes. But my only concern would be this late in the year you probably wouldn’t get a tenant in before the end the year, I defer to your tax guy as this year the property would have no rental income. LMK what he says if this is the case. Hopefully it’s situation one instead.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
9mo
Was it rented out before the vacancy? if so then obviously. Was it your primary home before the vacancy? Then probably not.
If neither of those are true then almost certainly. I don’t think you’d have to capitalize them like you might any pre-rental repairs/capex. If this is the case I would expect your tax guy to say yes. But my only concern would be this late in the year you probably wouldn’t get a tenant in before the end the year, I defer to your tax guy as this year the property would have no rental income. LMK what he says if this is the case. Hopefully it’s situation one instead.
Thanks for the input. I should've mentioned that I purchased the property with the investment loan in the middle of this year, did repairs and 2 months later got a tenant in, so I never lived in it.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
9mo
If you’ve already had a tenant “Bill the layman” says you’re golden. You get all real expenses as deductions, even during vacancies. In fact. You usually get more because you have deductible utility expenses with your repair expenses.
Hinton, WV · Member since 2026 · 1k+ posts · 373 votes
7mo
Yeah you can deduct those holding costs during vacancy if the property was genuinely held for rental purposes the whole time. The IRS looks at intent, and fixing issues to make it rentable supports that. One thing most people miss though - keep detailed records of what work you did and when, because that helps prove the rental intent if you ever get questioned. Are you tracking all the repair costs separately from the holding costs?