Tax deductions for flips and rentals spanning two years

[Shaun T.]

Hi all ... I have several flips that I purchased in 2022 and will get executed in 2023.  Same with rentals where I purchased in 2021 and fixed them up and started renting them in 2022.  My questions are how do I account for expenses and tax deductions.

For example: mortgage interest, utililies and other carrying costs - can I claim them as expenses in 2022?

Thanks for your take on this. And yes, I know I will need to consult a tax professional for this.  I am just trying to get your take as people in the business.

[Ashish Acharya]

On a high level: 

Flips- operational costs can be deducted in 2022. The rehab cost (material, labor, and such) will be capitalized and will offset your profit when you sell in 2023. These expenses will be reported as inventoty in your balance sheet assuming you are filing an S-corp with that many flips going on. 

Rentals- operational costs can be deducted in 2021, usually. The rehab cost (material, labor, and such) will be capitalized and still start depreciation once you stated rent in 2022.