expenses prior to selling a rental property - but claiming primary exemption

Forum|Forum|3 years ago
March 3, 2023
1 reply
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I had a property that was a rental for 2.5 years ending Oct 2022. We then fixed up the home in preparation for sale and sold it in Nov 2022.

1) Are the expenses between oct-nov prior to sale deductible in the same way that normal rental business expenses are (ex: slot them into repairs, improvements, maintenance, etc.)?

2) We lived in the home prior to turning it into the rental and thus can claim the primary home capital gains exemption on the sale since we lived there more than 2 of the last 5 years. Does this change anything with those expenses prior to sale?

TurboTax Business Windows

Mike9241

see this link

https://www.stessa.com/blog/fixing-up-expenses-sale-of-rental-property/

zack7373Author

Thanks! I don't think this answers my question as explicitly as I hoped. I'm specifically asking about expenses that were incurred after the tenant moved out and the house was vacant prior to sale, which I have read mixed articles about how to treat these expenses. Some places state that I should treat them like normal rental business expenses, while others say to lump them together and list them as a depreciable item that will add to the basis after the sale. These would be dramatically different results on my taxes given I will be using the primary exemption so the increase in my basis will not help me at all.

That article does not specifically say it is talking about AFTER tenant move out and whether that should be treated differently. It seems to be describing run of the mill rental expenses.

RobertB4444

The thing is that the IRS makes no distinction between major improvements made in the year of the sale or any other year. If the improvements made have more than a year of useful life and they are above the deminimus amounts requiring capitalization then they get added to the basis.

IRS rules on residential rental property

@zack7373

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