Repairs done prior to "In Service" date of rental home
Hi, I am looking for help on the following situation, appreciate any suggestions
Last year 2022 was the first time we rented our home, we moved out on 06/02/2022 and gave it to a property manager. The Property manager has done some repairs (paining, cleaning etc) and posted for rent on Zillow on 06/20/2022 (the in service date).
Now the question is, can the cost of repairs done between 06/02 to 06/19 be dedicated as expenses when filing taxes? even though the repairs are before the in service date, but they are in the same month, so would they qualify as deductible rental expenses?
Thanks,
Ed
Traditionally those early repairs would be added to the cost basis and depreciated with the rest of the home.
but if the repairs were relatively inexpensive and tended towards cosmetic, you're probably a safe bet to go ahead and deduct it.
Thanks Allan, I see that for depreciation IRS uses mid month rule irrespective of when the rental was placed in service in that month. So wondering if there any IRS rule that says something similar for prior rental expenses?
looking at the IRS publication: https://www.irs.gov/publications/p527 it says we can't deduct pre-rental expenses? Pre-rental expenses. You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent.
so not sure, what it means by "the time you make it available for rent" is it the month or the date?
Quote from @Ed Ju:
My CPA told me we can't deduct prior to placing it in service, which means we are actively marketing it for a Tenant. If you are still doing prep work and it's not advertised, then it's not in service. If your PM was working on it but advertising it at the same time, then you may be OK.
Thanks @Nathan Gesner, do you know if "Safe Harbor Election for Small Taxpayers" will apply in this situation where we can duct up to $10,000 for repairs/improvements in that tax year?