I am living in my fixer upper now and for the next 6 months. While living here I am making a handful of major improvements on the house which will help increase rental value (capital expenses, like new appliances and flooring) as well as small repairs that were already needed when moving in.
The home will not be rented fully until 2022. How can I use these repairs and capital expenses as deductions? Is it possible to also write off the other common deductions (PMI, interest, depreciation) while living here? Will it help if I have a roommate sign a lease ASAP?
I don't believe you can expense anything until the rental is "in service". I think the best thing you can do is add up your expenses and add them to your depreciable basis.
If you start advertising a room for rent that may be enough to qualify it as a rental, and thus you can deduct expenses, but then you are living in a room and must make adjustments for that.
If you want the best possible advice, talk to a CPA now and ask for the best way to handle it. If you want the cheaper option, record every expense and keep all receipts. Bring it to your CPA later and find out what they can do for you.
I think this explains it. I also am not a CPA and do not want to sound like I am giving advice. Best advice I got from a CPA once was "Everything is deductible, until the IRS questions it and audits you." His point was to make sure you are OK defending your deductions. If you don't think you can defend the deduction make sure you don't take it.
Tom, thank you. That is exactly what I was looking for!! The fact that I am also living in the property while renting it out complicates things, so I'll need to ask a CPA. However, I should be able to deduct everything (some as repairs, made after tenant moves into one room, and some as capital expenses deducted over time, made before advertised as available for rent).