How to file taxes on rental property that didn’t get rented in 2006?
I bought a property as a primary residence in 2004 (residence A). I lived there until 10/10/2006, when I moved into a new primary residence home (Residence B). I place my original residence (A) up for rent. I did not find a renter until after January in 2007. My question is can I still file Schedule E in 2006 and take a loss for the residence A? I do know I would have to prorate the portion I lived there in schedule A and the portion of the year I had it for rental in Schedule E (if I am allowed to show I received no rental money). Also, for depreciation, what should I use for the value of my home (and for other things, like appliances, or other assets in the home)?
Thank you.
John
Tagged with: Appliances • Assets • Value Of My Home
Filed under: United States
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The IRS allows you to deduct expenses in preparing the property for rental such as advertsiing, cleaning etc. However, since rental property is passive investment you can only claim a loss against passive income. If youi had no income on the rental, you cant claim a loss. You may not want to take depreciation unless you plan to own the rental until the mortgage is paid off. Otherwise you will have to file a recovery on the depreciation you claimed when you sell the property. You need to speak to an accountant who handles rental property taxes to fully explain the tax situation. Good luck.
If you change your home or other property (or a part of it) to rental use at any time other than the beginning of your tax year, you must divide yearly expenses, such as taxes and insurance, between rental use and personal use.
You can report as rental expenses only the part of the expense that is for the part of the year the property was used or held for rental purposes.
For depreciation purposes, treat the property as being placed in service on the conversion date. Your basis would be the lower of your acquisition cost or the fair market value of the property, usually over a life of 27.5 yrs for residential rental property.
You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. However, you can include the home mortgage interest and real estate tax expenses for the part of the year the property was held for personal use as an itemized deduction on Schedule A (Form 1040).
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