Tax filing question

[Nate Maier]

Good Afternoon,

My girlfriend bought her first single family house this year in the middle of October.  She renovated it over the winter months and has a lease signed starting March 1st.  There were relatively significant cash outlays during the renovation (7-10K) that all happened in 2015.  She hasn't had any income from the property during that time as it has been vacant.

She is a full-time student with a part time job that pays around 20K a year.  Her parents pay her tuition and claim her as a dependent.  My question has to do with the losses associated with the acquisition.

Should she be claiming the loss or should she pass it to her parents?  Same goes for the depreciation of the property.  

Next year she expects to have a similar income level as well.

Any help is greatly appreciated.  Feel free to pm for my phone number to talk specifics

Thank you!

Nate

[Dave Toelkes]

@Nate Maier,

While you don't specifically name the date that the renovations that made the property ready and available for rent were completed.  My response assumes that the renovations were really completed on or after January 1 this year.

If this is the case, then your girlfriend's renovation costs are all added to the tax basis of the property.  The costs are eventually recovered over time through depreciation expense beginning in the month the property is placed in service as a rental. 

Your girlfriend should consult with her CPA on what expenses can be claimed for this property in 2015 and on which forms.  I do know that if your girlfriend files a tax return she may not be able to claim the personal exemption if she is already claimed as a dependent on her parents' return.  Just another topic to discuss with the CPA.