Tax question for "in service" property

[Joseph Hammel]

Hello, In 2018 I started a major remodel on a new sfh. I didn't finish it until may of 2019. Its a rental now. Per my tax prep persons advice on past deals the property has to be In service to claim in that year. I haven't done my 2018 taxes yet (extension) so I was wondering if there are any loopholes available to claim this property in 2018?

[Nicholas Aiola]

@Joseph Hammel A property isn't placed in service until it is ready (liveable) and available (advertised for rent). Mostly all expenses paid before the in-service date must be capitalized and added to the property's basis. Once the property is placed in service, depreciation begins - depreciation expense is computed using the property's basis. It is also at that point that you can begin deducting operating expenses in full.

It sounds like your property wasn't placed in service until 2019 so, unfortunately, you're likely out of luck for 2018, unless...

The only way you'd be able to begin depreciation (and deduct certain repairs as operating expenses) in 2018 is if you inherited tenants when you purchased it in 2018. The property would then be considered "idle" during the rehab and you would still be able to deduct depreciation throughout that period of time - see Publication 527 for more info.