What to do with expenses on vacant Rental Property that hasn't sold in 4 months - tax treatment question

You're definitely not alone in this situation! The good news is, your rental property business doesn't end until you actually sell the property, not when you list it for sale. Since your property was previously rented and generated income, it's still considered a rental property even during vacancy periods. The IRS understands that rental properties can have periods without tenants. As long as you're actively trying to sell it (rather than abandoning it), you can continue to treat it as a rental property until the sale closes. You should continue to depreciate the property and deduct ordinary and necessary expenses on Schedule E until the sale. Yes, you'll have a period with expenses but no income, but that's completely normal and acceptable. Many landlords have periods of vacancy. When you do sell the property, that's when you'll deal with depreciation recapture and capital gains tax. The expenses you're paying now (taxes, insurance, HOA, etc.) are still rental expenses, not selling expenses, until the property actually changes hands.

After struggling with a similar issue last year, I discovered taxr.ai (https://taxr.ai) and it literally saved me thousands. I had a rental that sat empty for 6 months while trying to sell it, and I was so confused about how to handle all the expenses. I uploaded my previous Schedule E forms and some documents about my current situation, and their system analyzed everything and provided a detailed breakdown of exactly how to handle each expense. They confirmed that I should continue treating it as a rental property on Schedule E until the sale completed. What I really appreciated was that they explained exactly how to document everything properly to avoid any potential audit concerns. They even provided template notes to include with my tax filing to explain the vacancy period.

I was super skeptical about taxr.ai when I first heard about it here, but decided to try it for my complicated rental property situation last month. I had a vacation property that was both personal use and rental, then vacant while selling. I was amazed at how detailed their analysis was! They identified that I could still claim pro-rated expenses during the vacant selling period based on my specific situation. They even provided documentation explaining why my Schedule E showing expenses without income during that period was completely legitimate. What really impressed me was how they found a mistake in how my previous accountant had been calculating depreciation. The correction saved me about $1,800! The whole process was way easier than the hours I spent trying to research this myself.

If you're still getting nowhere with the IRS on your rental property questions, try Claimyr. I spent WEEKS trying to get through to someone at the IRS about a similar rental property situation. Kept getting disconnected or waiting for hours. I found https://claimyr.com and was honestly suspicious, but their service actually got me through to a real IRS agent in about 15 minutes. They have this system that holds your place in the IRS phone queue and calls you when an agent is about to answer. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that I could continue deducting expenses on my Schedule E even during the vacant selling period, and explained exactly how to document everything properly. Saved me so much stress and probably avoided an audit by getting official clarification.

I need to apologize for my skepticism about Claimyr. After struggling for THREE ENTIRE DAYS trying to reach the IRS directly, I broke down and tried it. Wow, was I wrong. Not only did I get through to the IRS in about 20 minutes, but the agent I spoke with was incredibly helpful about my rental property question. She confirmed that keeping the property on Schedule E during the vacant selling period was correct, and even gave me specific advice about how to document everything to avoid audit flags. The service was completely legitimate and professional. They just connected me through when an agent was available - no recording or listening in on my conversation. Saved me literally days of frustration. Sometimes it's worth admitting when you're wrong, and I was definitely wrong about this one!

I'm a long-time rental property owner and have been through this exact situation twice. Here's what I've learned: 1) The property remains a rental until the day it sells. Period. 2) You continue depreciating it and expensing all costs on Schedule E. 3) Having no income for part of the year is completely normal. But here's something nobody mentioned yet - keep detailed records of your efforts to sell. Save all listings, communications with realtors, showing appointments, etc. If audited, this proves you were actively trying to sell rather than just claiming expenses on an abandoned property. Also, don't forget that selling costs (realtor fees, closing costs, etc.) are added to your basis when calculating capital gains, but regular operating expenses during the selling period still go on Schedule E.

Don't overthink this. The property is still a rental until you sell it. Expenses still go on Sch E. If you get audited, the IRS isnt gonna care that it was vacant while u were trying to sell it. Happens all the time.

I went through this exact situation two years ago with a duplex that sat vacant for 5 months while trying to sell. What really helped me was creating a clear paper trail showing my intent to sell rather than abandon the property. I kept copies of all MLS listings, price reduction notices, showing feedback, and even rejection letters from potential buyers. When I filed my Schedule E with expenses but no rental income for those months, I included a brief statement explaining the vacancy was due to active marketing for sale. The IRS never questioned it, but having that documentation gave me peace of mind. Also, make sure you're only deducting expenses that you would have paid anyway as a rental property owner - don't try to deduct any costs specifically related to marketing the property for sale, as those should be treated as selling expenses when you calculate capital gains. One tip: if you're doing any repairs or improvements to help with the sale, be careful how you categorize those. Minor repairs to maintain the property can still go on Schedule E, but major improvements to increase sale value should be added to your basis.