Claim depreciation this year or wait until next?

3 Replies

I just closed on a single family that I will offer for rent once I get done painting and doing some small repairs.  It will probably take me a couple weeks.  If I’m unable to get a tenant moved in before the end of the year, do I still claim depreciation on this house?  It was purchased as an investment property (i.e., all the mortgage paperwork describes it as such).  

Second question: if it doesn’t rent until next year, do I still get to deduct cash spent on repairs, etc?

Thank you!

Your "in service date" is the date the rental is ready and available for rent. 

This can be when you get an occupancy permit, or when it's first able to be shown, advertised, ect. 

Your depreciation starts at that point. 

Most costs incurred prior to that point (assuming it was purchased vacant) will be added to your basis of the property and capitalized, not written off. Though some renovation items can be broken out. 

When you first rent it =/= when it starts being depreciated. 

Thanks!

Originally posted by @Natalie Kolodij :

Your "in service date" is the date the rental is ready and available for rent. 

This can be when you get an occupancy permit, or when it's first able to be shown, advertised, ect. 

Your depreciation starts at that point. 

Most costs incurred prior to that point (assuming it was purchased vacant) will be added to your basis of the property and capitalized, not written off. Though some renovation items can be broken out. 

When you first rent it =/= when it starts being depreciated. 

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Originally posted by @David Barwick :

I just closed on a single family that I will offer for rent once I get done painting and doing some small repairs.  It will probably take me a couple weeks.  If I’m unable to get a tenant moved in before the end of the year, do I still claim depreciation on this house?  It was purchased as an investment property (i.e., all the mortgage paperwork describes it as such).  

Second question: if it doesn’t rent until next year, do I still get to deduct cash spent on repairs, etc?

Thank you!

Sometimes it is not an option. Once you deemed to put this asset in service, you will have to start depreciate it. It’s is sometime better to start earlier just to document for the long term cap gain treatment.