Tax question regarding write offs

6 Replies

In the process of getting our STR ready for next season to begin renting in March 2021. We've been spending quite a bit of money updating but I just realized we won't be able to claim these expenses in 2021 when it's producing income because we're spending the money now. Is this correct? Really don't want to wait until 2021 to finish with the updates as we're trying to get er done. Am I missing something here?

@Wesley Myers   Disclaimer: I'm not a CPA (not even close) so please seek professional advice before making any commitments.  :)

I think I know what you are referring to, but I think if you can 'activate' the property this year you might be able to squeeze in the expenses. So, perhaps just create the listing on one platform (VRBO) and then block your dates out until next Spring...then you have 'activated' the rental so any expenses you incur from that time on theoretically can be accounted for. That being said, it's likely all CapEx if you are doing big renovations, so you will have to depreciate most of it anyway, so might not be worth the effort or trying to find a loophole there.

Curious to see what somebody who actually knows what they are talking about here has to say though.  LOL  :)

My understanding from my accountant is that you can claim the expenses in the year in which you put it on the market to rent. So list it in 2020 even if you won't have renters occupying it until 2021. Double check that with your accountant, of course, but this is how we have always claimed our write offs on new purchases or newly occupied spaces.

You should be able to claim these expenses in 2021 when you put your STR in service even if you spent money of improvements in 2020.

I had a building I bought in 2015 and it took me 2 years to rehab it until it got rented in 2017. I claimed all expenses in 2017 when I put the rental property in service. Just because you put it in service later doesn’t mean you can not deduct your expenses. Check with your accountant if in your specific case you can already claim it in 2020 or if you have to wait till 2021 to claim these expenses.

Originally posted by @Jon Crosby :

@Wesley Myers   Disclaimer: I'm not a CPA (not even close) so please seek professional advice before making any commitments.  :)

I think I know what you are referring to, but I think if you can 'activate' the property this year you might be able to squeeze in the expenses. So, perhaps just create the listing on one platform (VRBO) and then block your dates out until next Spring...then you have 'activated' the rental so any expenses you incur from that time on theoretically can be accounted for. That being said, it's likely all CapEx if you are doing big renovations, so you will have to depreciate most of it anyway, so might not be worth the effort or trying to find a loophole there.

Curious to see what somebody who actually knows what they are talking about here has to say though.  LOL  :)

If her property is not in livable condition or not ready for its intended use, then you can't simply advertise it for rent and be eligible for the deduction.

If her property is in livable condition and there is an effort to advertise the property, then it is in livable condition.
If she chooses not to rent it this year, then it is not placed in service. 

Blocking out dates does not put the property into service.