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. In order to answer any questions in the event of an audit, you'll need to keep proof that your rental sat vacant for a good reason.
TL;DR (Too Long; Didn't Read)
You can deduct rental expenses even when your rental property is vacant if you meet certain criteria. The IRS's criteria includes having the property available for rent and not using the property for your own personal enjoyment.
Allowed Deductions for Taxes
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 of the Rental
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.
Transitioning to a Vacation Home
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 of the Rental
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.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.