How can I claim expenses for a new business, if it hasn't had income yet?

Question

I'm turning a poolhouse on my property into a short-term/mid-term rental.  I've spent a lot on repairs, updates and furnishings this year (things like repairing drywall, updating electrical panel, but also buying washer/dryer, dishes etc).  I planned to rent it out this year but it will likely not be ready until next year.

I have an LLC for it already.  How can I claim expenses for this new business, since it hasn't had income yet?

Thank you!

AlexO · Accepted Answer

TVCV,

You will be unable to deduct these expenses until the property is available to rent.

The repairs, updates, and furnishings will generally be depreciated over the useful life of the asset. Depreciation begins when it is ready and available to be rented.

When the property is available to be rented, the income and expenses will generally be reported on Schedule E.

MatthewD · Accepted Answer

Hi TVCV,

You must capitalize all the improvement to the pool house and add it to the original basis (cost).  Then you depreciate that over 29.5 years when it is put into service.  You don't claim any expenses in 2024.