Rental property 1st year

[artp]

Taxpayer bought a house for rental property in Dec 2016 closing on 12/09/16 and took out mortgage receiving 1098 showing interest $216.18, Mortgage Insurance premiums $1972.25 and points $2130.38. She held it out for rent in 2016, but was no able to get a lease signed until Jan 2017. Occupancy will start 04/01/2017. Is any of this deductible in 2016 on Sch E? or Sch A ? or does she have to wait till 2017?

 

[Ringers]

As long as the property was "available to rent" on Dec. 9, 2016 you can deduct the expenses incurred in 2015 (including 30 days of depreciation) on the 2016 schedule E.  The points must be amortized over the life of the mortgage, unlike a personal residence.  The mortgage insurance, as long as it does not cover more than one year, is deductible when paid, that is, in 2016.

[artp]

Ringers,

 

If the rental property were not available till Jan 2017 would anything be deductible in 2016? Held over till 2017? or just plain lost?

artp

[Pacun]

If the property was not ready for occupancy until January, the add everything to the basis.

Good point from Ringers... I always thought depreciation started until you put it in service which is the day tenants move, but I think I was wrong.

[Roberts]

I agree with Pacun on the basis. If you buy a rental property and don't have an occupancy permit (usually the last thing you get to make it available for rent) - you aren't a landlord. You are considered to be developing your investment still.

 

 

[Max W]

17 hours ago, Pacun said:

If the property was not ready for occupancy until January, the add everything to the basis.

Good point from Ringers... I always thought depreciation started until you put it in service which is the day tenants move, but I think I was wrong.

Depreciation starts when you put up the "For Rent" sign and it is ready to be moved into.  (it has to be habitable and there has to be an effort to rent it)

[Pacun]

6 hours ago, Max W said:

Depreciation starts when you put up the "For Rent" sign and it is ready to be moved into.  (it has to be habitable and there has to be an effort to rent it)

It makes sense that depreciation starts as soon and it is ready and waiting for clients. When you buy machinery and it is in place and ready to go, you start depreciating it even though your clients will get there in a few months.