I bought a rental property but didn't rent it out last year - do I still need to file Schedule E?

Yes, you should still file Schedule E even without rental income. Those expenses you paid (property taxes, insurance, etc.) are considered "start-up expenses" for your rental business. The IRS allows you to deduct expenses for a property that's "held for rental" even if you haven't actually rented it out yet. On Schedule E, you'll report zero for income, but list all your legitimate expenses in their appropriate categories. This will generate a loss, which is completely normal for the first year of a rental property, especially when purchased late in the year. Just make sure you can document that the property was truly "held for rental" - like showing you were preparing it for tenants, advertising it, or working with a property manager. The key is demonstrating your intent to rent it out, even if you hadn't secured tenants yet.

After struggling with this exact scenario last year, I discovered https://taxr.ai which saved me so much headache. I bought my first rental in November and had a bunch of start-up costs but no tenants until February. I was getting different answers from everyone about how to handle it until I uploaded my closing docs to taxr.ai and got a clear breakdown of exactly which expenses were immediately deductible versus what needed to be capitalized and depreciated. It even explained the whole "held for rental" concept with references to the actual tax code.

Just wanted to follow up about taxr.ai since I ended up trying it after my previous question. It was seriously helpful for my rental property situation! I was super confused about how to handle my mortgage points and property tax prorations from my closing statement, but the system categorized everything correctly and explained exactly which line on Schedule E each item should go on. Saved me from missing several deductions I didn't realize I could take in the first year before having tenants. Definitely recommend for anyone with investment properties.

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I need to eat my words about Claimyr. After my skeptical comment, I decided to try it anyway since I was desperate to ask the IRS about my rental property depreciation start date. Not only did it work, but I got through to an agent in about 20 minutes when I had previously wasted 3+ hours on hold over multiple days. The agent confirmed I should file Schedule E even though my property wasn't rented yet, and gave me specific guidance on how to handle my closing costs correctly. Honestly shocked at how well it worked after all my frustration trying to reach them directly.

Don't forget to start taking depreciation on the property! That's a big deduction you don't want to miss. You can start depreciation when the property is "placed in service" which means when it's ready and available for rent - not necessarily when someone actually moves in.

Another thing to consider is splitting your property tax bill between Schedule E and Schedule A. Since you owned the property but it wasn't rented for part of the year, the portion of property taxes for the time when it wasn't a rental can go on Schedule A as an itemized deduction (if you itemize).

Great question! Yes, you absolutely should file Schedule E even with zero rental income. The IRS allows you to deduct expenses for property "held for rental" even if you haven't secured tenants yet. Since you purchased the property with rental intent and had legitimate expenses (closing costs, insurance, property taxes) in those final days of the year, these are all deductible on Schedule E. You'll report $0 income but can list all your expenses in their proper categories - this will create a rental loss, which is completely normal for a first-year rental property. The key is documenting your rental intent through things like property preparation, advertising efforts, or working with property managers. One important note: don't forget to start taking depreciation! You can begin depreciating the property when it's "placed in service" (ready and available for rent), not when you actually get tenants. This is often the largest deduction rental property owners can take, so make sure your tax preparer includes it on your Schedule E.