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Updated about 6 years ago on . Most recent reply

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Patrick McCabe
  • Rental Property Investor
  • Westbury, NY
3
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Can I deduct expenses incurred prior to listing my STR?

Patrick McCabe
  • Rental Property Investor
  • Westbury, NY
Posted

I purchased my property in October 2018... however I did not list it on Airbnb until January 2019...therefore I had no rental income in 2018.

Can I still deduct expenses such as mortgage interest, property taxes, depreciation, etc. for my 2018 return?

I understand I cannot claim these losses against my other income but was wondering if I would be able to carry them forward to offset future rental income.

Thanks.

Most Popular Reply

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Nicholas Aiola
  • CPA & Investor
  • New York, NY
1,249
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1,319
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Nicholas Aiola
  • CPA & Investor
  • New York, NY
Replied

@Patrick McCabe @Benjamin Enriquez

The key date in question is the "in-service" date. That just means when the property is ready (in liveable condition) and available (advertised) for rent.

Most operating expenses incurred before the in-service date are added to the property's basis and depreciated over it's useful life, as @Lisa Graesser said. Therefore, you're out of luck re: depreciation in 2018.

However, you may be able to deduct some expenses as start up expenses when business officially "begins", which will be in 2019; you also may be able to claim some expenses (taxes and mortgage interest, namely) as second home deductions in 2018, before the property was placed in service as a rental.

Keep in mind, if you inherit tenants, the property is placed in service immediately on the date of closing, even if you kick them out the next day. Idle time between tenants does not remove the property from being in service. 

  • Nicholas Aiola

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