Can I Deduct Rental Expenses If My Property Is Vacant?

by Fraser Sherman, Demand Media Google
    If you let a friend stay there free, your expenses aren't deductible.

    If you let a friend stay there free, your expenses aren't deductible.

    When your rental house or duplex stands vacant, the question the IRS wants answered is "Why?" If the house is available for rent, you can write off expenses on your taxes, even when it's empty. If it's vacant because you plan to vacation there and change your mind at the last minute, that's another story.

    Allowed Deductions

    You can claim the same deductions on a vacant rental as when it's occupied.Your mortgage interest, maintenance, repairs, homeowners insurance and the cost of advertising your rental are all deductible. You can also depreciate the house -- deducting some of the value for wear and tear -- while it's unoccupied.What you can't do is claim a deduction for the loss of rental income: If nobody's signing a lease, that's your problem, not the IRS's.

    Usage

    Once the house is available for rent, you can start writing off expenses, even if you haven't rented it out to anyone yet. If you have to take a week to clear out the apartment after your first tenant leaves, it's still a rental and you're still entitled to your deductions. If, on the other hand, you take it out of the market -- after you decide to put it up for sale, for instance -- then your rental deductions stop.

    Transition

    If you switch your second home to rental use midway through the year, you can't deduct any rental expenses before the conversion date. For example, suppose you use your Florida beach house to escape the cold during January, then leave. On May 31, you put it up for rent. Your expenses for January through May 30 are personal, not rental. Any time it's vacant after May 31, you can keep claiming your deductions.

    Mixed Use

    If you mix rental and personal use throughout the year, you have to divide up expenses and depreciation between them. With three months of personal use and nine months of rental, for instance, you can claim 75 percent of your expenses as a deduction. If the house is empty during a personal-use period -- you canceled your December vacation, for instance -- you can't claim rental expenses unless you immediately put it up for rent. Personal use includes times when your family or friends stay there for less than the fair market value.

    About the Author

    Fraser Sherman is a former reporter with the "Destin Log" newspaper and now freelances full-time. His work has been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life," and he's the author of three film reference books, including "Screen Enemies of the American Way." He specializes in finance and tech articles.

    Photo Credits

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