The expenses in this section are deductible from rental income on Schedule E of Form 1040 in determining your profit.
However, special assessments for paving, sewer systems, or other local improvements are not deductible; they are added to the cost of the land. See 16.4 through 16.7 for real estate tax deductions.
These expenses generally have to be capitalized and depreciated (16.4).
You may start claiming depreciation in the month the building is ready for tenants. For example, you bought a house in May 2012 and spent June and July making repairs. The house was ready to rent in August and you began advertising for tenants. On your 2012 return you begin depreciation as of August, even if a tenant did not move in until September or some later month. The month the building is ready for tenants is the month that determines the first-year depreciation write-off under the mid-month convention. See 9.5 for the monthly depreciation rates for residential rental property. Rates for nonresidential buildings are at 42.13.