pre rental expenses
primary residence put into service as a rental December 2023. Not rented until January 2024. Are pre rental expenses listed on 2024 tax return as Carryover Expenses. I have no rental income in 2023.
Answers
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Hello Pie! IRS Publication 527 says that you can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent (see pg 6).
It is possible to file Schedule E and list rental expenses without having any rental income to report. To do that, select Income > Business Income > Rental Income (Schedule E) from the menu in your account.
Keep in mind that rental income is considered passive income. This means that a rental loss can only be used to reduce other passive income on your 2023 tax return. If you aren't able to fully deduct your rental losses in 2023, they can be carried forward to your 2024 tax return.
When you go to prepare your 2024 return next year, look for your passive loss carryovers on Form 8582 of your 2023 return. Unallowed losses on Form 8582 Part VII are the losses that carry forward to the next year. -
Thanks, Henry. I tried to enter info on Schedule E, but the software prevents me from entering 'zero' days rented to others so I can't enter any expenses at all.
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Hi Pie,
In Schedule E, at the question "How many days did you rent the property?" if you enter 0 days rented to others and 'Save and Continue' the follow-on question is 'Did you try to rent it?".
If that answer is 'no,' you are correct and will not be able to enter any expenses. If however, you tried to rent it, i.e. it was available to rent but no one rented it, you'd answer 'yes' and be able to enter expenses.
"Since you tried to rent the property in 2023, it's still considered a rental even though you didn't actually rent it. Make sure to enter your rental expenses so you can deduct them on your return."
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Thanks, Kristine. The software will not continue past zero days rented to others. I can not Save and Continue. It prompts me to fix the error; that the days rented to others must be greater than zero. Cannot proceed past that prompt to enter number of days rented to others must be greater than zero.
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Hello again,
I am not sure why you are unable to get past this screen. Our support team can help you with this.
May I suggest you delete the rental information you have already entered and start again? I am able to create this scenario. Leave blank any fields where 0/$0 applies.
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Thanks, Kristine. That works, but only if I say that I had no personal days use of the rental. I lived there for 11 months. The house was available for rental on Dec. 1, 2023 and my tenant moved in on January 1, 2024. Is this correct since I did live there for 11 months. I understand I must divide expenses accordingly, i.e. only 1/12 of expenses may be eligible to be deducted.
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If you converted your personal home to a rental property during the year, you should only include the personal use days after the date that you converted your home to a rental property. So if the home became a rental on Dec 1 and you did not use the home for personal use after Dec 1, then you can answer no when asked, "Did you or your family use this rental during 2023 for personal purposes?"
When you are entering your rental expenses, be sure to only enter amounts applicable to the portion of the year that the home was a rental. For example, if you are claiming your home real estate taxes, you would only enter 1/12 of the total real estate taxes paid as a rental expense. Any expenses that apply only to the rental (such as advertising or management fees) can generally be fully deducted.
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Thanks Henry. I think your response has cleared up my confusion about personal use. Will examine expenses to accurately report them. Really appreciate your help!
