How do I enter a large special assessment on a vacation home/ short term rental that was unable to be used for an entire tax year due to damage.

Forum|Forum|2 years ago
February 26, 2024
2 replies
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I purchased a condo in 2021 and was to rent it in 2023. Due to Hurricane Ian, damage was found and I was unable to rent it for the entire 2023 tax year. During this time I paid over $60,000 in special assessments as the damage to the building was not covered by insurance.

Am I able to deduct this loss and if so, how do I go about doing it?

Thank you!

Best answer by RobertB4444

Because the event that caused the disaster was Hurricane Ian it is a qualified disaster and any money you spent on repairs that was not reimbursed by insurance is eligible for a disaster deduction.

Here is the IRS info on disaster deductions.

Here is the FEMA website to get the numbers you need for hurricane Ian.

You can enter the disaster loss into TurboTax in the 'Deductions and Credits' section under 'Other Deductions and Credits' - 'Casualties and Thefts'.

@krobertson33

PatriciaV

Employee

Was the property ever listed as available to be rented? The IRS allows you to claim depreciation on the property while it is idle (not in use), if was placed into service (listed to be rented) at a prior date. Otherwise, you have an increased basis, but no deduction.

See IRS Pub 527 - Idle Property

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krobertson33Author

Hello! Yes it was available to be rented during 2022. It was also scheduled to be rented for several weeks during 2023, however all had to be cancelled due to the construction of the building which lasted the entire year, leaving the entire building uninhabitable.

RobertB4444Answer

Because the event that caused the disaster was Hurricane Ian it is a qualified disaster and any money you spent on repairs that was not reimbursed by insurance is eligible for a disaster deduction.

Here is the IRS info on disaster deductions.

Here is the FEMA website to get the numbers you need for hurricane Ian.

You can enter the disaster loss into TurboTax in the 'Deductions and Credits' section under 'Other Deductions and Credits' - 'Casualties and Thefts'.

@krobertson33

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Carl11_2

Employee

Am I able to deduct this loss and if so, how do I go about doing it?

(I am assuming you have never ever ever reported this property on SCH E since you purchased it in 2021).

No. It's not deductible at all. Instead, it gets added to the cost basis of your property. For example, if you paid $100,000 for the condo in 2021, then paid a $60,000 special assessment in 2023, your cost basis on the property is now $160,000. This won't help you "right now". But it will definitely come into play for depreciation when/if you convert the property to a rental in 2024. It will also help you years from now when/if you sell the property.