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Tax Planning/Rental property not ready yet... lots of expenses


Dear Owen,

I own a townhouse that's been empty since 2011. I've been repairing it as time permits b/c I have a tight schedule among work, my other property, family, etc. I'd lived in it since 1992, so quite a few things gave up in the last 2 years, and needed to be fixed. The fact is that I have a pile of receipts for the repair expenses, but haven't been able to get it ready and rent it yet.

How can I declare these "repair for rent" expenses in my income tax if I don't have actual rental income in 2013?

Is there a way to declare the expenses incurred in the previous years 2011 and 2012 in my 2013 income tax?

Thank you in advance.



Richard - Those expenses to get the property ready for rent must be capitalized and added to your cost basis for depreciation once the property is placed in service for rent.  You cannot "declare" these expenses as regular operating expenses because you were not operating the property as a rental when you incurred them.

Although this may not be the answer you wanted, I hope this clarifies the situation as I understand it.

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As an Enrolled Agent, I am fully capable of providing tax advice as it relates to personal and business income taxes. Enrolled Agents are the only Federally licensed tax practitioners and are admitted to practice before all administrative functions of the IRS. My specialty is working with small business owners who file Schedule "C" and helping them to structure their business in such a way as to maximize as many tax advantages as possible. I also enjoy working with individuals who have both routine as well as complex tax situations. I prefer to concentrate on individuals and small business tax planning.


I have a 25 year background in financial services including tax, bookkeeping, insurance, real estate and securities. I was previously the Chief Financial Officer of a local and national franchise organization. I am currently semi-retired, but used to own (in partnership with another EA) an individual and small business financial engineering firm where I work with nearly 2,500 individuals and small business owners in nearly every state and almost every continent, assisting them in all aspects of their tax and financial well-being. I have prepared or reviewed more than 8,000 tax returns in my career.

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