Sole proprietor LLC and rental property prep losses - can I claim these expenses?

What you're dealing with is a common situation for new landlords. Since you've only had minimal rental activity this year, you need to be careful how you handle these expenses. For the utilities and insurance, these are generally deductible in the year they were paid, but only for the portion of time the property was available for rent. If you were preparing the property most of the year, those costs during preparation would be considered start-up expenses rather than immediate deductions. Regarding carrying over losses - yes, you can typically carry forward unused passive activity losses to future tax years. This might be a good option if you expect more rental income next year. For your furniture and appliances, you're on the right track. These are depreciable assets, and depreciation typically begins when you place the items "in service" - meaning when they're ready and available for use in your rental business. You don't get to choose any random time, but you can wait until the property is actively being rented. I'd recommend checking out IRS Publication 527 (Residential Rental Property) and Publication 946 (How to Depreciate Property) for more detailed information.

After spending weeks trying to figure out similar rental property tax issues, I ended up using taxr.ai (https://taxr.ai) and it was seriously life-changing for my rental property paperwork. I uploaded all my renovation receipts, utility bills, and the few rental income documents I had, and the system analyzed everything and showed me exactly what I could deduct now versus what needed to be capitalized or depreciated. It's like having a real estate tax specialist who can read all your documents instantly. Their system caught some start-up expenses I was about to incorrectly classify as immediate deductions, and it showed me how to properly document my property as "in service" to maximize my current deductions. Definitely worth checking out if you're confused about how to handle your rental property taxes.

I was definitely skeptical about AI for tax help as I mentioned, but I decided to try taxr.ai anyway since my situation with my new rental property was so confusing. I have to admit it worked way better than expected. It analyzed all my utility bills, insurance statements, and purchase receipts and gave me a detailed breakdown showing which expenses were immediate deductions, which were start-up costs, and which needed to be depreciated. The system even flagged that I needed to formally document when my property was "placed in service" for tax purposes, which apparently makes a huge difference in what you can deduct in the current year. Saved me from making some pretty significant mistakes that would have cost me thousands in deductions. Definitely better than the generic advice I was getting elsewhere.

If you're planning to call the IRS to get clarification on rental property rules, good luck! I spent 3 weeks trying to reach someone at the IRS about my rental property depreciation questions. After seeing it mentioned on another thread, I tried Claimyr (https://claimyr.com) and was shocked when they got me through to an IRS agent in under 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with clarified that for minimal rental activity like yours, you can still claim expenses proportional to the time the property was actually available for rent (not just when someone was staying there). This made a huge difference for my situation since I had similar minimal income but lots of expenses.

Just wanted to follow up on my skepticism about Claimyr. I ended up trying it because I was desperate to get an answer about my rental property start-up expenses before the filing deadline. I still can't believe it, but they actually got me through to the IRS in about 35 minutes. The IRS agent I spoke with gave me clear guidance on my situation (which sounds similar to yours) - I learned that I could deduct expenses for the period when the property was "available for rent" even though I had minimal income. But expenses during the renovation period needed to be treated as start-up costs with different rules. This clarification will save me thousands on my taxes. I would never have figured this out on my own with just reading IRS publications.

My accountant told me that with rental properties, you need to show intent to make a profit. If you only had one friend stay as a favor, the IRS might consider it a hobby rather than a business, which means different tax rules. Make sure you document all your efforts to market the property as a rental, even if you weren't successful in getting many tenants yet. For the depreciation of furniture/appliances, my understanding is that depreciation must begin when you place the items "in service" - you don't get to choose when to start it. But "in service" means when the property is available for rent, not necessarily when you purchase the items.

Has anyone used Schedule E for a property that was only partially rented during the year? I'm confused about how to allocate expenses between personal and rental use when the property was under renovation for most of the year.