I purchased a Single - Family home with the intention of turning it into a househack. The home has been registered as my primary residence. I have been working on many renovations since, but do not have any rental income thus far.
What do I need to know about taking these costs into consideration for my taxes when I have not earned any passive income thus far?
I am early in my research, but It seems like PAL rules- passive loss options might be a possibility (I make less than $100000 and less than 25,000 in costs)? or business start-up expenses? I don't think I could qualify for Real estate professional status As I have a W-2 and didn't purchase the home until August.
Any advice or links to resources would be much appreciated!
Intent does not matter in this scenario. Your improvements are not a deduction this year.
In the event that you do put tenants/roommates in next year, THEN you can start looking at deductions. However, the vast majority - possibly all - of your expenses will NOT be deductible. Instead, they will be included in the cost basis of the property and depreciated over the life of the property.
The IRS is all about what has actually happened, not intent. It's why business start up expenses are not deductible until you actually start your business. Same concept when putting an asset into service as an investment. Until the asset is actually In Service, it's all just wishful thinking and the IRS allows nothing.