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Deductions on carriage house thats not in service

Forum|Forum|4 years ago
November 26, 2021
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We purchased a home last year, it's a multi-family. We live in the main house, it also has a 2 unit carriage house on it that was occupied by 2 tenants when we took ownership. It needed extensive repairs and updates to get up to city code. We did not renew the lease with the tenants and it has been vacant for around 10 months now. We have been getting quotes on doing the repairs. Our accountant has said that we cant deduct those expenses as the property is not in service and not occupiable. Other research shows that it can be. Just looking for clarification on this.

Best answer by Critter-3

Yes ... all the improvements can be placed into service when you put the rental back on the market as depreciable assets. Read up on the rules on being a landlord here : https://www.irs.gov/pub/irs-pdf/p527.pdf

A

Anonymous_

Employee

With respect to improvements to the property, the cost of those improvements cannot be deducted (capitalized) if the property is not "ready and available" for rent.

The property cannot be "ready" for rent if it is considered not fit for occupancy according to the county code.

V

val31178Author

What about this other post https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/yes-you-would-have-to-capitalize-them-you-can-deduct-ex/01/350044#M13814

Can all the repairs be lumped together and depreciated over the next 27.5 years as explained in the last post in the above link?

Critter-3Answer

Yes ... all the improvements can be placed into service when you put the rental back on the market as depreciable assets. Read up on the rules on being a landlord here : https://www.irs.gov/pub/irs-pdf/p527.pdf