where to record pre rental expenses subject to $5.000 ceiling

Forum|Forum|1 year ago
March 30, 2025
2 replies
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ProSeries Professional

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Best answer by TaxGuyBill

You first need to determine if the rental rises to the level of an "active trade or business". Startup expenses only apply to an active trade or business.

If it doesn't rise to that level, the costs are usually capitalized into the Basis of the property.

If it does rise to that level, yes, I would enter the allowable amount as an 'other deduction' on Schedule E and if there are any additional expenses, create an Asset Entry Worksheet to amortize the startup expense.

sjrcpa

Level 15

On the Balance Sheet as start up costs. No deduction - $5,000 or otherwise - until the rental business starts.

The more I know the more I don’t know.

R

RRWAuthor

Level 2

Thanks for your response. So the property was "available to rent" 9/4/24 and not rented as of 12/31/24. IRS allows up to $5,000 for immediate expenses deduction, and balance amortized over 180 months. How is that entered into Pro Series? My thinking is just show $5,000 as Schedule E expenses and put balance as separate entry on Form 4562??

T

TaxGuyBillAnswer

Level 15

You first need to determine if the rental rises to the level of an "active trade or business". Startup expenses only apply to an active trade or business.

If it doesn't rise to that level, the costs are usually capitalized into the Basis of the property.

If it does rise to that level, yes, I would enter the allowable amount as an 'other deduction' on Schedule E and if there are any additional expenses, create an Asset Entry Worksheet to amortize the startup expense.

qbteachmt

Level 15

Are the "pre-rental" really improvement costs to make the property habitable?

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