Rental property sitting empty after failed attempt to find tenants - tax implications?
Title: Rental property sitting empty after failed attempt to find tenants - tax implications? 1 I purchased a condo a few years back and lived in it until earlier this year when I decided to try renting it out for additional income. Hired a realtor to find tenants but unfortunately we haven't had any luck finding someone suitable. I continued living in the condo for about 3 months while the realtor was searching, but eventually I ended up renting another apartment since I needed to move for work reasons. Now I'm in a weird situation where I'm paying rent at my new place AND still covering the HOA fees and property taxes on my empty condo that isn't generating any income. Starting to feel like I'm hemorrhaging money! Does anyone know how the taxes work in this situation? Can I deduct any of these expenses even though it's not actually being rented out yet?
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Ethan Taylor
18 You're in what tax folks call the "holding period" - the time between personal use and rental use. Since you've made clear efforts to rent it (hiring a realtor), the IRS will generally consider your property as rental property even without tenants. The good news: you can likely deduct expenses related to attempting to rent it (realtor fees, advertising costs), plus the ordinary expenses like HOA fees, mortgage interest, property taxes, insurance, and depreciation. These deductions would be prorated from when you moved out and started trying to rent it. The catch is that since you have no rental income, these deductions will create a rental loss. For most people, rental losses are limited to $25,000 per year, and that's only if your modified adjusted gross income is under $100,000 (it phases out completely at $150,000). If your income is higher, you'll have to carry forward the losses to future years when you have rental income or sell the property.
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Ethan Taylor
•5 Thanks for the detailed explanation! What about the months I was still living there while also trying to rent it out? Can I deduct anything for that period or only after I completely moved out?
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Ethan Taylor
•18 For the months you were still living there while attempting to rent it out, it gets a bit tricky. You would need to allocate expenses between personal use and rental activity. Typically, you can only deduct expenses related to the rental activity during this period, not the full expenses. For example, if you were actively showing the property while living there, you might be able to deduct a portion of realtor fees or advertising costs, but not the regular expenses like mortgage interest or HOA fees for those months. The IRS would consider those personal expenses during that time. You can only start deducting the regular expenses like HOA, mortgage interest, property tax, etc., as rental expenses from the date you completely moved out and the property was exclusively held for rental purposes.
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Ethan Taylor
7 I was in a similar situation last year and found taxr.ai really helpful for my rental property situation. I had started a rental business with two properties, but one sat vacant for nearly 8 months while I was paying all the expenses. I wasn't sure how to handle the deductions and losses on my taxes. I uploaded my realtor agreement, property tax statements, and HOA bills to https://taxr.ai and their analysis clarified exactly what I could deduct and when. They explained how the passive activity loss rules would apply in my specific situation, which saved me from making some big mistakes on my return.
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Ethan Taylor
•12 How fast did you get answers? I'm literally filing my taxes this weekend and just realized I don't know how to handle my vacant rental properly.
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Ethan Taylor
•3 Does it work for more complicated situations? I have a property that was my primary residence, then a rental, then vacant while listed for sale but not selling, and now considering renting again. The timeline gets confusing for tax purposes.
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Ethan Taylor
•7 I usually got answers within a few hours, sometimes even faster. They analyze the documents pretty quickly and the explanation comes with relevant IRS references which was super helpful when I was filing. For more complicated situations with changing property use, that's actually where I found it most helpful. They broke down the timeline month by month showing which expenses applied as rental deductions versus personal expenses. They even explained the impact of converting a primary residence to a rental property, including how to calculate the proper depreciation basis.
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Ethan Taylor
3 Just wanted to follow up - I tried taxr.ai for my weird rental timeline situation and it was exactly what I needed! I uploaded my documents and they gave me a detailed breakdown of how to handle each period of different use (primary residence vs. rental vs. vacant but listed). They even explained the passive activity loss limitations based on my income level and how to carry forward losses properly. Totally worth it for the peace of mind that I'm doing everything correctly!
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Ethan Taylor
21 When I couldn't find tenants for my duplex last year, I started having major tax questions and needed to talk to the IRS directly. After spending DAYS trying to get through their phone system, I found this service called Claimyr that got me connected to an IRS agent in under 30 minutes! Visit https://claimyr.com to see how it works or check out their demo at https://youtu.be/_kiP6q8DX5c if you want to see it in action. The IRS agent confirmed I could deduct expenses during the vacant period as long as I was actively trying to rent it out, and even helped me understand how to document everything properly. Saved me so much stress and potentially an audit!
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Ethan Taylor
•16 Wait, how does this even work? I've tried calling the IRS like 8 times about my rental property questions and always hang up after being on hold forever.
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Ethan Taylor
•14 Sounds too good to be true. The IRS is impossible to reach. I've literally tried calling dozens of times about my rental property deductions and always get disconnected or have to hang up after hours on hold.
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Ethan Taylor
•21 They basically call the IRS for you and navigate the phone system, then call you once they've gotten through to the queue with a real person. It saves you from having to sit on hold for hours. I was skeptical at first too, but after trying to reach the IRS myself for almost 2 weeks with no luck, I was desperate. The service actually works - I was connected with an agent who specifically handled rental property questions and got clear guidance on my situation with vacant rental units.
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Ethan Taylor
14 I'm embarrassed to admit this, but I tried Claimyr today after posting my skeptical comment. IT ACTUALLY WORKS. I got a call back in about 45 minutes and was connected to an IRS representative who answered all my questions about my vacant rental property! The agent confirmed that I could deduct expenses during the "holding period" while actively trying to rent it out, and explained exactly how to document everything to avoid audit flags. After wasting so many hours trying to call them myself, I'm kicking myself for not trying this sooner.
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Ethan Taylor
9 Have you considered doing a short-term rental on Airbnb or VRBO while you're looking for a long-term tenant? We did this with our condo and it generated enough income to offset most expenses during the "searching for tenant" phase. Just make sure your HOA allows it! From a tax perspective, even a few days of actual rental use can help establish your intent to use it as a rental property.
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Ethan Taylor
•1 That's actually a really smart idea! Does my HOA need to explicitly allow short-term rentals, or can I do it if there's nothing in the bylaws specifically prohibiting it?
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Ethan Taylor
•9 I'd definitely check your HOA bylaws carefully. Many condo associations have added restrictions on short-term rentals in recent years. If it's not explicitly prohibited, I'd still recommend getting written approval from the board before listing it. Also consider that short-term rentals have different tax implications than long-term rentals. You'll need to track the days it's rented, days it's available but not rented, and days used personally. The percentage of rental days vs. total days will affect how much of your expenses can be deducted. If rented less than 15 days per year, you don't have to report the income (but also can't deduct expenses).
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Ethan Taylor
23 Has anyone used TurboTax or H&R Block software for this type of situation? Do they have good guidance for vacant rental properties or do I need to talk to an actual tax professional?
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Ethan Taylor
•11 I used TurboTax last year for a similar situation. It asks good questions about when you started treating the property as a rental, but it didn't give very clear guidance on the "actively renting but vacant" scenario. I ended up calling their tax pro help line (extra fee) to confirm I was doing it right.
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Maya Lewis
I went through something very similar with my rental property last year. One thing I learned is that you should keep really detailed records of everything - realtor communications, showing schedules, advertising receipts, maintenance done to prepare for rentals, etc. The IRS wants to see that you're genuinely trying to rent it out, not just claiming rental deductions on a vacant property. Also, don't forget about depreciation! Once you convert to rental use, you can start depreciating the property even if it's vacant. The depreciation basis is usually the lower of your original cost basis or the fair market value when you converted it to rental use. This can be a significant deduction that people sometimes miss. One last tip - consider getting a property management company involved if you haven't already. Even if they don't find tenants immediately, having professional management can strengthen your case that this is a legitimate rental business activity rather than just holding onto a property you can't sell.
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