Where to enter expenses of fixing up rental property to sell it

If the property was not available to be rented (or you had no plans to rent it again), any repair costs you incurred before you listed the property increase the basis of the property and reduce any gain on the sale. You would enter these costs as a separate Rental Asset (improvements), which would qualify for depreciation if the sale didn't occur in the same year.

Because you can't claim depreciation on assets added and sold in the same year, you may wish to consider the Safe Harbor Election for Small Taxpayers. TurboTax will ask you about this election under the Assets/Depreciation section of your Rental Property. If you qualify for this election, you can expense up to $10,000 in costs that would otherwise be depreciated over a very long time. If you choose the Safe Harbor Election, the repair costs would NOT be added to your basis in the property.

During the period before the former rental is sold, the mortgage interest would be considered Investment Interest Expense. This is an Itemized Deduction on Schedule A.

Any repairs needed in order to close the sale may be included in Selling Expenses.

Additional Information:

• IRS Pub 527 "Residential Rental Property"
• Where do I enter income and expenses from a rental property?
• How do I handle capital improvements and depreciation for my rental?
• TurboTax Tax Tip: What Are Deductible Investment Interest Expenses?