Pre-rental expenses while restoring property

[David]

Taxpayer purchased rental property in Feb 2017 and spent all of 2017 restoring, repairing and improving the property. The property was not rented in 2017. I know that all of the restoration, repairs, and improvement expenses are capitalized and not depreciated until the property is advertised for rent (ready for rent).

I can't tell for sure from pub 527 whether the mortgage interest, taxes, insurance and utilities expenses can be deducted or if they must be capitalized. It appears that even though these costs are for managing, conserving, or maintaining the rental property, these expenses aren't deductible until the property is available for rent. 

However, I am reading that the expenses such as utilities, insurance, interest and taxes can be deducted while the property is vacant for repairs and improvements.

Can anyone let me know the answer and possibly a cite?

Thanks.

 

 

 

[Pacun]

I don't have a cite but you can capitalize all those expenses.

I like this question and I hope someone else answers it for you.  Someone could argue that you can use those expenses on Sch A, but what if the person already has two houses? Also with the new law, you might be limited or not benefit by using those expenses on Sch A.

[Lee B]

19 hours ago, David said:

 

However, I am reading that the expenses such as utilities, insurance, interest and taxes can be deducted while the property is vacant for repairs and improvements.

 

 

 

I have never read anything suggesting these expenses are deductible pre rental.

Take a step back and look at the bigger picture.

Until this property is ready and available to be rented, it is not rental property, it is investment property.

Once you consider your questions in those terms, it should then be fairly easy to answer these questions.