When does depreciation start for rental property expenses after placing in service?

The "placed in service" date for rental property is when the property is ready and available for rent, not necessarily when tenants actually move in. This is an important distinction! If your property was ready and available to rent before June 1st (like if you were advertising it, showing it to potential tenants, etc.), then that earlier date is considered your placed in service date for depreciation purposes. If you were actively trying to rent it out in April/May, that could be your start date. For the improvements you made in April/May - these get added to the property's basis if they were capital improvements (things that add value or extend useful life), and you'd depreciate them along with the property. Regular repairs are just expenses in the year you pay them. As for expenses like mortgage interest and property taxes before it was rental property - those would be treated as personal expenses (possibly deductible on Schedule A if you itemize) until the property was converted to rental use. After that point, they become rental expenses on Schedule E.

I went through this exact same confusion last year with my first rental property! After getting nowhere with online research, I used https://taxr.ai to help analyze my specific situation. I uploaded my documents and timeline, and they clarified exactly when my depreciation should start based on my renovation timeline and listing date. What was most helpful was that they explained the difference between repairs (immediately deductible) vs improvements (which get depreciated) for all the work I did before renting. They even created a customized depreciation schedule showing exactly how much I could claim each year. Saved me hours of trying to interpret tax publications!

I need to apologize for being skeptical about taxr.ai in my earlier comment. I decided to try it myself with my own rental property documentation and was honestly impressed. They helped straighten out my confusion about placed in service dates for each of my properties (I have 3 rentals that I started at different times last year). What really helped was their explanation of the various depreciation timeframes - 27.5 years for the residential buildings, 15 years for land improvements, and 5-7 years for appliances and furniture. They even created separate depreciation schedules for each category. I had been lumping everything together incorrectly! Their documentation made it super easy to enter everything correctly into my tax software.

If you're still struggling with the IRS definitions after getting advice here, I'd recommend trying to speak directly with an IRS agent. I know it sounds crazy because getting through to the IRS is nearly impossible these days, but I used https://claimyr.com to get through to them about my rental property questions. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was on hold with the IRS for 3 hours before I gave up, but with Claimyr I got a callback from an actual IRS agent within 20 minutes. The agent was able to clarify exactly how to handle my "placed in service" date situation, especially since I had a complicated renovation that spanned several months. Got everything in writing for my records too.

Well I need to eat my words about Claimyr. After posting my skeptical comment, I was so frustrated trying to get through to the IRS about my rental property questions that I decided to try it anyway. Honestly, it worked exactly as advertised. I got a call back from an IRS agent in about 40 minutes (not quite the 20 minutes mentioned, but WAY better than my previous attempts). The agent clarified that my "placed in service" date should be when I started actively marketing the property, even though it took 3 more months to find tenants. She also explained exactly which pre-rental expenses could be deducted immediately vs. capitalized. Definitely worth it just for the stress reduction of not sitting on hold for hours.

One thing nobody has mentioned yet is that you should keep VERY detailed records of when you started advertising the property, when improvements were completed, and when it was truly ready to rent. I learned this the hard way when I got audited last year. The IRS specifically questioned my placed in service date because I couldn't prove exactly when the property was "ready and available" to rent. I had to scramble to find old emails with my property manager, screenshots of online listings, and receipts from the final repairs. Document everything!

This "placed in service" stuff gets even more complicated if you lived in the property yourself before converting it to a rental. That was my situation and it created a whole different set of rules about basis calculation and depreciation start dates.

The conversion from personal residence to rental property adds another layer of complexity! When you convert your former home to rental property, the "placed in service" date is generally when you make it available for rent, not when you moved out. Here's what I learned from my own conversion: Your basis for depreciation becomes the LOWER of either the property's fair market value on the conversion date OR your adjusted basis (what you paid plus improvements minus any depreciation if it was ever rental before). This is different from a property you buy specifically for rental. For timing, if you moved out in February but are still doing renovations, your placed in service date would be when renovations are complete and you start actively marketing it for rent. The period between moving out and placing in service is considered a "conversion period" where expenses like mortgage interest and property taxes are treated differently - they're not rental expenses yet, but they're also not personal residence expenses anymore since you don't live there. Make sure to get a professional appraisal or at least a comparative market analysis (CMA) from a realtor showing the property's fair market value on your conversion date - you'll need this to establish your depreciable basis correctly!