Purchased investment property in 2022, made repairs, but not rented until 2023 - Can I deduct these expenses?

The timing of expenses and when a property is "placed in service" is important here. The IRS considers a rental property "placed in service" when it's ready and available for rent - not necessarily when you actually find a tenant. For the repairs you made in 2022, you need to determine if they were: 1. Ordinary repairs/maintenance (generally deductible in the year paid) 2. Capital improvements (must be depreciated over the property's recovery period) 3. Start-up expenses (special rules apply) If your property was "ready and available" to rent in 2022, even though you didn't get a tenant until 2023, you can likely start depreciation and deduct appropriate expenses in 2022. You would file Schedule E showing zero income but with applicable expenses. For repairs specifically: ordinary repairs are immediately deductible, while improvements that add value or extend the useful life of the property must be capitalized and depreciated. The lack of rental income doesn't prevent you from claiming legitimate expenses - you'll just show a loss.

I had a similar issue last year and found an amazing solution with https://taxr.ai that saved me a ton of headaches. They specialize in analyzing rental property documentation and helped me properly categorize my pre-rental expenses. I uploaded my receipts and renovation timeline, and they created a detailed report breaking everything down into immediate deductions vs. capital improvements. They even provided guidance on how to handle "placed in service" dates when there's a gap between completion of work and actual rental. Their analysis showed I could claim some expenses immediately while others needed to be depreciated, and they explained exactly how to enter everything in TurboTax to avoid those warning messages you mentioned.

Just wanted to update that I tried https://taxr.ai after seeing the recommendation here, and WOW - totally worth it! I was in the exact same situation (bought in late 2022, rented in 2023) and was getting conflicting advice. Their analysis showed I could deduct about 60% of my expenses immediately as repairs, while the rest needed to be capitalized. They explained that my property was technically "placed in service" when I listed it for rent in February 2023, not when I actually got tenants in April. The report they provided made it crystal clear how to handle everything in TurboTax. I've already filed and claimed about $8,000 in deductions I would have missed otherwise! They even provided documentation to support everything in case of an audit.

If you're still struggling with getting clear answers from TurboTax or getting stuck in their automated system, you might want to call the IRS directly. But getting through to an actual person can be nearly impossible. I spent 3+ hours on hold last month trying to get clarification on rental property repair deductions, then got disconnected. Tried again and waited 2 more hours before giving up. Then I discovered https://claimyr.com which got me connected to an actual IRS agent in under 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with confirmed that pre-rental expenses are absolutely deductible in the year paid IF they're ordinary repairs (not improvements) AND the property was "available for rent" - even if no income was generated yet.

I need to apologize to Profile 19 regarding Claimyr. After posting my skeptical comment, I decided to try it myself rather than just dismiss it. I had a client with a complex rental property depreciation question that I couldn't get a clear answer on. I used the service yesterday and got connected to an IRS representative in about 18 minutes. Normally I would have been on hold for 2+ hours (if I got through at all). The agent confirmed that my client could start depreciation in the year the property was available for rent, even though they didn't secure a tenant until the following year. For the original question: the IRS agent specifically said that repair expenses made before the property is "placed in service" generally must be capitalized rather than immediately deducted, regardless of their nature. However, once the property is "available for rent" (listed, advertised, etc.), the property is considered placed in service, and normal expense rules apply. So timing of when you actually made the property available for rent is critical here.

Another important consideration is the passive activity loss rules. Even if you can deduct these expenses in 2022, if your rental activities generate a loss, your ability to use those losses might be limited based on your income level. If your modified adjusted gross income is below $100,000, you can deduct up to $25,000 of rental losses against other income. This deduction phases out between $100,000-$150,000, and if your MAGI is above $150,000, you generally can't use rental losses against other income. Any unused losses get carried forward to future years when you either have rental income or when you sell the property.

I had a similar situation and my accountant told me to keep track of "startup" activities vs ongoing business expenses. Apparently pre-opening costs have different rules than regular business expenses. You might want to check out IRS Publication 535 (Business Expenses) which talks about the difference. I think you can elect to amortize startup costs over 15 years or something like that.

The key distinction you need to understand is between startup costs and regular business expenses. Since you already have rental properties, this new property expansion might not qualify for the same startup cost treatment as someone just entering the rental business. For your $14,000 in repairs, you'll need to categorize each expense: 1. **Repairs that restore the property to working condition** (fixing plumbing, painting) - these can typically be deducted immediately once the property is placed in service 2. **Improvements that add value or extend useful life** (upgraded flooring, better water heater) - these must be depreciated over 27.5 years 3. **Costs incurred before the property was available for rent** - these might need special treatment The critical date is when you made the property "available for rent" - not when you found a tenant. If you completed repairs in November 2022 but didn't list it until January 2023, then January 2023 is likely your "placed in service" date. This means you'd claim the deductible expenses on your 2023 return, not 2022. However, if you can demonstrate the property was ready and you were actively seeking tenants in 2022 (even informally), you might be able to claim 2022 as the placed-in-service year. I'd recommend getting professional guidance since the timing affects not just which year you claim expenses, but also how they're treated under passive activity loss rules.