I purchased a rehab property in late 2007. I worked on it in 2007 and finished recently (2008) and it is now on the market.
Specifically, which expenses, etc., do I report on the 2007 Schedule C and what do I hold until 2008 to report?
The general rule for property flipping – You don’t report any direct property expenses until the property is sold. As far as the IRS is concerned, this property is not added to your inventory until the year it is sold, regardless of your actual acquisition date. You accrue all your property expenses until the property is sold. If the sale happens this year, then report the sale to include all your expenses on Schedule C when you do your 2008 tax return next year. If this property is sold this year, then your acquisition date for Schedule C purposes will be 1/1/2008
Consult your CPA for specific details.
however, general business expenses (cell phone, office supplies, mileage, postage, advertising) basically everything NOT put into the property, is deductible in the year you incurred the expense.
even if you have no revenue.