Deducting Expenses Prior To Buying 1st Rental

5 Replies

I’ve been a lurker for a little while now. Listening to podcasts, reading and suffering from a case of analysis paralysis. Ready to start actually acting and curious how it works with expenses I incur prior to purchasing my first rental.

If I’m not able to find and purchase a property before the end of the year can the expenses be rolled to the next year?

Do I need to setup some type of structure for those expenses to go towards? A DBA?

Thanks for any advice.

-Ronnie

Originally posted by @Ronnie Howard :

I’ve been a lurker for a little while now. Listening to podcasts, reading and suffering from a case of analysis paralysis. Ready to start actually acting and curious how it works with expenses I incur prior to purchasing my first rental.

If I’m not able to find and purchase a property before the end of the year can the expenses be rolled to the next year?

Do I need to setup some type of structure for those expenses to go towards? A DBA?

Thanks for any advice.

-Ronnie

If you don’t identify a rental property, most of the expenses will be personal in nature. 

Flipping is little different. If it was a flipping activity, some of the operational cost would be deductible. 


@Ronnie Howard

Various groups have pretty much daily REI meetings here in Houston. If you need more contacts, more ideas or more motivation - just go talk to other people who used to be hesitant.

Originally posted by @Ronnie Howard :

@Ashish Acharya - thanks for replying.

So expenses that are not property specific would go against the overall income made from REI?

I’m assuming it can’t be deducted against my W2 income, can it?

 Investigatory cost of acquiring the specific property gets added to the basis. If you are just incurring an expenses to look at various properties, those expenses are generally personal in nature, especially when you do not even have any properties. 

Once you have properties, and you incur expenses that is not specific to one properties, then you can allocate the expenses between other properties such as website expenses. 

These expenses need to go against the rental income first, and if there is a net loss, you might be able to deduct it against your w-2 income if you meet the exceptions. There are other rules you have to meet first.