tax write offs from previous years

[Ryan Dunnie]

I am in the process of fixing up a guest house in my back yard.  There is a good chance I won't be able to rent it until early next year.  Will I be able to write off the materials I used to fix it up this year on my 2021 tax return?

[David M.]

@Ryan Dunnie

No.  Speak to a tax professional.

Since the guest house isn't in service, i.e. ready to rent, your improvements would go towards the cost basis and ultimately depreciated over 27.5 years once you are ready to rent it.

[Basit Siddiqi]

@Ryan Dunnie

The cost of the materials and labor likely needs to be capitalized and then depreciated over its useful life.

[Eamonn McElroy]

I'm assuming this is currently a personal use asset, and not already a rental that's just taking a long to turn over or renovate.

We first have to examine when a change in use occurs.

Change in use will occur, in this situation, for a rental real estate asset on the first date that the asset is both (1) in habitable condition and (2) advertised as available for rent.

That doesn't mean you'll be able to expense based on a whim, it just opens the door.  You'll have to apply the tangible property regulations to determine treatment of costs.