Question

We bought a new rental property in 2020 but didn't rent it till 2021

Forum|Forum|5 years ago
February 7, 2021
1 reply
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We bought a second home in 2020 with the intent to rent it out. Due to the remodel it wasn't ready to rent until January 2021. I paid points, interest and taxes for this 2020 purchase but made zero in rental income. I have been told to put this under investment expenses and not home mortgage expenses. I can't figure out how to do this since I made no rent in 2020. What am I doing wrong?

ColeenD3

It becomes rental property the moment it is placed in service and ready and available to rent. Until that time, there is no reason your can't include your mortgage interest and property taxes on Schedule A.

From the IRS:

Placed in service: Ready and available for a specific use whether in a trade or business, the production of income, a tax-exempt activity, or a personal activity.

B

bc999lonsdale

How do you report this in TurboTax? The section where you add the rental property requires rental income. If a $0 is entered, it gives an error message claiming that it can't be entered as a rental property (rental or royalty) unless it has rental income. So, how do you resolve?

ColeenD3

Again, you can't enter it in 2020. It was not placed in service and ready to rent. On your 2021 tax return, you will include the purchase price plus improvements and purchase settlement charges to create your adjusted basis for depreciation.