Tax deductions for 1st rental property

6 Replies

Hello.

I am working on my first rental property. My plan was to BRRRR it. I purchased it and am nearly done rehabbing it.
But, I keep hearing various things about not being able to deduct repair expenses and mileage for a rental property if it isn't advertised for rental, or if it is your first property. The email answer I received from my CPA was not clear. (I'm sure I will talk to him for clarification, or find a new CPA, but I wanted to reach out to the BP community).

Apparently there is a podcast about this topic...and surely it has been discussed on forums...but I cannot seem to find this via the search function.

I'd appreciate any assistance.

Thanks!

@Josh Durham I rehabbed one half of my duplex while living in it this year. As I understand it, those improvements will be amortized over 27.5 years as they are permanent upgrades, not maintenance fixes. However, I will also be hoeing an accountant to file my taxes next year so I will not be assuming anything.
@Aaron K. Ha ha ha. This new app “upgrade” is killing me! Or maybe it’s my new iPhone. No idea what auto correct happened there.

@Josh Durham

You got some solid advice already.

You are not eligible to expense items until the property is ready for its intended use. Its intended use in this case is that the property is ready for someone to live in which includes items as a roof over the house, a working bathroom, etc.
The cost will be added to basis and depreciated over its useful life.

Think of it like this

Property A is rent ready and cost $200,000.
Property B is $150,000 and it will cost $50,000 to get it to the same condition as Property A.

The IRS wants both of these properties to be at a similar starting point.
If it wasn't the case - You would be reporting $0 of income since its not rented but take $50,000 of expenses.