Did not rent or advertise - Schedule E?
I have a multifamily home with 3 units. I live in one unit and the other 2 are rentals that had been rented out prior to 2023. In 2023 I did not rent the units out or advertise them. I do intend to rent the units out again, but would like to do some more work such as having the driveway repaved first. Can I deduct expenses (utilities, mortgage interest, taxes, etc.) on a Schedule E for my 2023 taxes?
If I enter 0 rental days for the property, I'm asked, "Did you try to rent the property to others at all during 2023?" If I choose no, it says "Since you didn't try to rent the property at all in 2023, it's not considered a rental" and to delete the property from my return.
From what I can find, IRS Publication 527 does not mention advertising/trying to rent the property as a requirement. I found the following:
Idle Property
Continue to claim a deduction for depreciation on property used in your rental activity even if it is temporarily idle (not in use). For example, if you must make repairs after a tenant moves out, you still depreciate the rental property during the time it isn’t available for rent.
Vacant rental property.
If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. However, you can’t deduct any loss of rental income for the period the property is vacant.
Comments
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It sounds like you have not retired the property and still intend to rent it in the future.
Generally, the IRS only considers property retired if it meets the following conditions:
-You sell or exchange the property.
-You convert the property to personal use.
-You abandon the property.
-The property is destroyed.
Because you have not retired the properties and they are temporarily idle, you will want to enter 365 days for the rental days for the software to allow the expenses while the properties are idle and undergoing repairs. -
Is there any written guidelines about the length of time that a rental property can be idle/vacant? I’ve been getting mixed answers on this with some people saying that a year or more vacant and the property should be converted to personal use or could be considered a “not for profit rental”.
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Hello,
There are no written guidelines, that I am aware of. However, the important part here is to be reasonable. It would be reasonable to spend 6-18 months or even more renovating an active rental property. It may not be reasonable spend 24-36 months though.
