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We are about to move out of our home and rent it out. If we want to fix it up (replace stove, microwave, A/C unit), are these expenses tax deductible while we are living here? Our first tenants move in next month. In other words, should we replace these things after the renters move in for it to be tax deductible?
You're preparing it to be a rental. So it's deductible. You do not need to wait until they move in. If you remodeled the place you would do it before tenant moves in/turn over
This is a bit more complicated than it may appear. First of all, any changes you do while you are living there are not going to be deductible as a business expense. At a minimum, move out first.
Between the time you move out and the time the home is available as a rental is called "Start-Up" expenses and is handled differently than operating expenses. When the home is available as a rental does not mean a lease is signed or tenants move in. It just mean when it available as a rental. A lot of people take out an ad somewhere, document that event, and call that the day it is available as a rental. Expenses after that are either operating expenses or improvements.
You should either consult a tax expert or at least learn about it on your own. I recommend the latter
You can deduct for expenses to make it ready for use before it is put into use. If you buy a property and have to do a ton of repairs you can write off a surprising amount but you need to hire a tax professional.
Like I said if you would have the expense without the rental you can't write it off. If there is an expense because of the rental you can't, with exceptions but not many. If you make a repair while living in it then it is an expense you would have had without the rental and aren't able to write it off, with exceptions.
Those expenses apply toward the basis. You can't deduct expenses until the property is put into service.
"Put into service" is the key word, as is "the basis".
Some CPA's will advise a homeowner to get an appraisal when a personal home is converted to a rental to have a legally-defensible "cost basis" for tax purposes.
They might also have a different opinion of what "put into service" means, and you really want to be on the same page as your tax-guy, since they'll be the one sitting right next to you if you get audited at some date in the future.
Seriously, hire a tax-dude before you spend any money, any where.
Whatever you pay will be a "business expense", so it's well worth it, and likely deductable!
We are about to move out of our home and rent it out. If we want to fix it up (replace stove, microwave, A/C unit), are these expenses tax deductible while we are living here? Our first tenants move in next month. In other words, should we replace these things after the renters move in for it to be tax deductible?
You can replace them now or later, it doesn't matter. Many of those items would be considered "Capital Improvements" under the tax code, you would be obligated to amortize the deductions over an extended period of time, i.e. a % each year. Also they have tax implications if you later sell the house in regard to how much capital gains tax you have to pay.
As long as your not living there it will be seen as an investment property and tax deductible. If you do it while living there it is a primary home and not deductible as far as I know although the IRS may not check the exact days that you moved out.
If the place is empty and your preparing to rent it out it will be tax deductible.
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