Deduction of Start Up Fees on Rental Property

Forum|Forum|4 years ago
March 23, 2022
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IRS Publication 527 does not allow me to depreciate startup expenses on rental properties on schedule E, i.e. taxes, insurance, cleaning, management fees, HOA fees, etc. incurred before the property was available/listed for rent. Does anyone know any other legitimate way to deduct these expenses? These are not improvements or physical property or closing expenses so I don't see how they could be added to the basis and capitalized/depreciated. I know some CPAs state that you can deduct up to $5000 in startup costs (and depreciate the rest over time) but other CPAs (and my tax guide) state the start up cost deduction is only for Active participation (Schedule C) businesses not for passive rental real estate (schedule E) activities. I don't itemize so I can't deduct the taxes under the $10K SALT state/local tax rule. Thank you in advance for your response.

Not A Product Question

Carl11_2

Employee

Unfortunately, start-up expenses for residential rental real estate are flat out not allowed. Anything such as repairs, maintenance, utilities, etc. incurred before the property was placed in service have never been allowed. Do not confuse that with property improvements, which is a completely separate thing.