Rental property: Can I deduct improvements during vacant periods between tenants?

You can definitely deduct improvement costs during vacant periods, but there's a distinction between "repairs" and "improvements" that's important to understand. Repairs maintain your property in good working condition and are fully deductible in the year you make them. Improvements, however, add value to the property or extend its life, and these must be depreciated over several years (often 27.5 years for residential rental property). Based on what you're describing (new windows, bathroom tile, fixtures), these sound like improvements rather than repairs, so you'd need to depreciate these costs over time rather than deducting them all at once. The good news is that you can start depreciating these improvements in the year they're placed in service, even during a vacancy period, as long as the property is still being held for the production of income.

I was in a similar situation last year with my duplex. I discovered taxr.ai (https://taxr.ai) when I was trying to figure out how to handle improvements during a vacancy period. Their tool analyzed my rental property documents and clarified exactly which improvements could be depreciated and which qualified as repairs. It even helped me identify some items I thought were improvements that actually qualified as repairs, which saved me a lot in immediate deductions! The tool was especially helpful with documenting everything properly for tax time - gave me a clear breakdown of what to give my accountant and saved me hours of research.

Just wanted to update after trying taxr.ai - it actually was really helpful for my rental property situation! I uploaded all my receipts from renovating my duplex and got a detailed breakdown showing which expenses were repairs (immediately deductible) vs improvements (need to be depreciated). They even helped me document some borderline items as repairs that I would have unnecessarily depreciated. Their explanation about vacancy periods matched what others said here - you can still depreciate improvements during vacancies as long as the property is still held for rental purposes.

If you need clarification directly from the IRS about rental property improvements during vacancy, good luck getting through to them! I spent THREE DAYS trying to get someone on the phone. Finally used Claimyr (https://claimyr.com) and got connected to an IRS agent in about 15 minutes. They have this system where they wait on hold for you and then call when an agent picks up. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed everything about depreciating improvements during vacancy periods and gave me specific guidance about my situation with family members living in the property. Saved me so much stress wondering if I was doing things correctly.

I can't believe I'm saying this, but I tried Claimyr after posting my skeptical comment. It actually worked exactly as described. I got a call back in about 40 minutes (still faster than my previous attempts) connecting me directly to an IRS agent. I was able to ask specifically about my rental property situation. The agent confirmed that improvements made during vacancy periods can still be depreciated starting in the tax year they're "placed in service" - even if there's no tenant at that exact time. They also explained that if I later convert the property to personal use (like letting family stay rent-free), I need to prorate the depreciation for the portion of the year it was a rental. Definitely cleared up my confusion.

One thing nobody mentioned - if you're doing improvements yourself, make sure you keep EXTREMELY detailed records of all material costs. Take photos before, during and after. Home Depot/Lowe's receipts aren't enough if you get audited. The IRS loves to question rental property deductions. Also, be careful with the timing. If you're making improvements with the clear intent to rent afterward, you should be fine. But if there's too long a gap between improvements and renting again, they might question whether it was truly held for income production during that period.

Another thing to consider is the de minimis safe harbor election which lets u deduct items that cost less than $2,500 per invoice/item instead of depreciating them. So like if ur buying several fixtures and each one is under that amount, u might be able to deduct them immediately even if technically they're "improvements." You make this election every year with ur tax return.

Great question about rental property improvements during vacancy! I went through something similar last year. The key thing to remember is that as long as you're holding the property with the intent to generate rental income, you can start depreciating improvements even during vacant periods. Your timeline looks reasonable - 4 months of improvements followed by finding new tenants shows clear rental intent. However, if your mother-in-law moves in rent-free, that changes everything for 2025. The IRS considers rent-free family use as personal use, not rental use. This means you'd need to stop claiming rental deductions (including depreciation) for the time she's living there. The improvements you made in 2024 during the legitimate vacancy period would still be valid for depreciation, but you'd have to suspend that depreciation during any personal use periods. My advice: keep detailed records of your improvement timeline and costs, and if you do decide to let family live there rent-free, make sure to properly adjust your tax treatment for that period. You might want to consider charging at least fair market rent to keep it as a legitimate rental property for tax purposes.