Able to Deduct 2017 Expenses on 2018 Tax Return?

5 Replies

I've got questions about deductions we can take on our rental home, which we are renting out for first time, with the tenants set to move in December 30, 2017.  It's my understanding we don't have to pay taxes on the rental income for our 2017 tax returns since it's less than 15 days.

*We are switching our homeowner's insurance to landlord's insurance that day and will be paying for 6 months or a year of coverage through 2018.  Since we are paying at the end of 2017, but the coverage will extend through 2018, can we deduct a prorated amount of the insurance payment we made in 2017 on our 2018 tax return?

*Similarly, we have incurred various expenses (painting, plumbing, etc.) in late-2017 to get our house ready to rent.  Is there any way to deduct those expenses on our 2018 tax returns?

Thanks!

Some probably you can. Others you need see a CPA. I always pay property taxes early even the deadline is February next year

@Ed Shin

Your understanding is incorrect. The 15-day rule applies to temporarily renting your home that remains your residence. You situation is different: permanent conversion into a rental property. 

It has to be reported on your 2017 tax return and include rent you received in 2017, as well as deductible expenses you incurred in 2017. Should also start depreciation in 2017.

I'm trying to think of a single scenario to where I had some sort of income come in and I was able to push it out to the following year on my return. Not a thing. 

But that doesn't mean its not possible.I'd check with your cpa. But it would be extremely surprising to me if the irs would ever let something like that fly.

Maybe if they paid rent december 31 for lease that was starting january 1?
Does it matter when they pay it versus when you deposit it? 

Not sure about that......

@Michael Plaks

Thanks for your input.  Is our situation still considered permanent conversion into a rental property if we plan on living it again when we return to the United States in 2-3 years?

Also, is there a guideline regarding when repairs must have taken place prior to the rental start date to be considered deductible expenses?  For example, we did some painting in September, some plumbing in October. some other work in November to prepare the house for the tenants to start renting December 30.   Can we deduct those expenses?  (We are living in the house right until the tenants move in.)  Thanks!

@Ed Shin

Yes, it is still conversion. Ignore the word "permanent" in my earlier post, it was used just to make my point.

Technically speaking, deductible expenses start when the property is "placed in service" - i.e. ready and available for rent. In your case, there is room for interpretation. Plus, you may be able to use the new $2,500 de minimus rule to deduct some (or maybe even all) of this work. 

I'd suggest to discuss the details with a tax preparer familiar with real estate, like many of us here on BP. It's really a back-n-forth discussion of details, with many small questions - very difficult to handle via exchange of messages. And in the first year of having a rental property, hiring a professional is highly recommended.

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