Tax question about rental vs flips

[John D.]

Good Morning,

I thought I saw a thread here several months ago relating to what can and can't be deducted on rental properties vs. flips.  Unfortunately, I cant seem to find it now.

I have a home that I initially intended to rent out in 2017 but later decided to sell it.  I'm wondering if and how that affects the deductions I may take.  The property in in New Jersey. 

Thanks for the responses and have a great day!!

[Sam Grooms]

First, you'll want to speak with your CPA, because each one has a different comfort level of what they're willing to do. 

Have you sold the property already? If not, wait 12 months from the purchase date to sell it. Also, do you have any sort of documentation showing your intent was a rental when you bought it? It's tricky since you never placed a tenant in there, but that goes back to what your CPA is comfortable with. 

As for specific deductions, the only difference in deductions I can think of between a flip and rental would be depreciation, but you recapture that anyway. So I don't see a difference there, especially over a 1 year period. 

You should be able to deduct every expense for the property, and just pay LTCGT on your gain (not profit, since it's not a flip!), if you hold it for a year and have proof it was meant to be a rental. That being said, while I am a CPA, I never practiced as a tax CPA. So again, consult with one/your's.