Rental Property

Gary writes:

Hello Gina - almost 3 years ago we rented out our house and rented a bigger one for ourselves as we needed more space. Around 6 months ago our tenant moved out and the place was left with lot of damage to the carpet, walls/stucco and the plumbing was falling apart ( though no fault of tenants).

We fixed up the property spent around 14 thousand dollars. While we were at it, we also got the house painted from outside and made it attractive  for new prospects. However, I had been out of job for almost 10 months, the outlook was not too encouraging, also our landlord had increased our rent to 3000/- per month ( from 2600/-). Given the circumstances,  it made sense for us to move back to our own house, which we did in September.

My first question is that can we still deduct the cost of fixing up the house as a rental expense?  Also, if the deductible part of mortgage payments, taxes and repair expenses are more than the rental income, can it be carried over to next year, though the house is no longer a rental property?  I am back in the job and have purchased additional property so we will have future rental income but from a different property.

Thanks for you advice and time.

My reply:

Hello! 

The type of renovating you are talking about would be capital additions and not currently deductible, but depreciable over time, IF it were still a rental property.  Since you moved into the property after your renovations these costs add to the basis of your property when you sell it.

The fact that you are renting out a different property does not change this answer.

Best wishes,
Gina

http://GLGcpa.com