If a property is ready to rent in 2024, can the taxpayer start depreciating the property in 2024?
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Yes, if a property is ready and available for rent in 2024, the taxpayer can begin depreciating the property in 2024—even if it is not actually rented to a tenant during that year.
1. Legal Reasoning
- Under the Internal Revenue Code and IRS regulations, depreciation begins when property is "placed in service," which means it is ready and available for a specific use in a trade or business or for the production of income, regardless of whether it is actually being used at that moment. For rental property, this means the property must be ready and available for rent, not necessarily actually rented or occupied by a tenant.
- IRS Publication 527 states: "You can begin to depreciate rental property when it is ready and available for rent. See Placed in Service under When Does Depreciation Begin and End?" It further clarifies with examples that if a property is ready and available for rent (for example, advertised for rent), it is considered placed in service, and depreciation can begin, even if it is not yet rented.
- The same principle is reflected in IRS Publication 946, which states: "You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first".
- The "placed in service" date is not the date of purchase or the date the property is first rented, but the date it is ready and available for its intended use (i.e., rental). For example, if you purchase a property in June, make necessary repairs, and list it for rent in August, the property is considered placed in service in August, and depreciation begins at that time.
2. Summary
If the property is ready and available for rent in 2024 (e.g., all repairs are complete and it is being advertised or listed for rent), the taxpayer can start depreciating the property in 2024, even if it is not actually rented until a later date.
Caveat: If the property is not yet ready and available for rent (e.g., still under renovation or not yet listed), depreciation cannot begin until it is actually ready and available for rental use.
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