Dear Tax Talk,
I moved out of a primary residence and converted it into a rental home in December 2011. I made it available by Dec. 15, 2011.
Can I claim any of the cleaning, handyman and painting expenses I incurred on 2011 taxes even though I didn't have a renter in the home until February 2012? What are the rules for rental home deductions?
-- John A., Arizona
The general rule is that if you use a property as your home for more than 14 days during the year, your deductions are limited to your income. An exception to the rule applies to the conversion of a home to a rental property. You don't have to count the days of personal use in 2011 if:
- You rented or tried to rent the property for 12 or more consecutive months.
- You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property.
As for rental home deductions, expenses incurred to make the property available for rental are deductible when the property is placed in service. "Placed in service" means when the property is available for rental even though it is not rented out for several more months.
For 2011, you can claim depreciation for the month of December, your repairs and 15/365 of your yearly expenses such as interest, real estate taxes and insurance on Schedule E. The remainder of your interest and taxes, but not insurance, would be deducted on Schedule A. Since you don't have any rental income for 2011, your property will have an overall loss. Remember to observe the passive loss limitations if your adjusted gross income, or AGI, exceeds $100,000.
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.