“ Can we carry over our deductions for improvements to write off against future income for 2011?” “ We did not deduct them on our 2010 taxes because we didn't have rental income.”---->Yes you can; you need to report your rental loss on Sch E of 1040.you’re probably aware of the dreaded passive loss rules. If they applied to you in previous year(s), some or all of your rental real estate losses may be deferred (suspended) for tax purposes. You generally cannot deduct those suspended losses until you either have positive taxable passive rental income from your rental real estate activities or until you sell the rental condo that generated the losses in the first place. As those suddenly deductible losses are big enough, you might create or increase a 2010 NOL that you can then carry back to prior years or forward to future year(s), 2011, with tax-saving results.If you are an active participant, then you may deduct up to $25,000 of rental r/e losses from active and portfolio income.
As you can see,there's a big difference between improvements and repairs. The improvement expenses are not deductible on your tax return in the year they are incurred. They are considered capital expenditures and are added to the basis of your rental condo and must be depreciated over the condo’s useful lives defined by the IRS.For example, if the original depreciable cost of the condo is $250,000, then it’d generate depreciation of $5,455 per year ($150,000 / 27.5 years). You can carry over your depreciation deduction from form 4562 and list it on line 20 of Sch E.Improvements,i.e., additions to the structure, installing insulation , or modernizing a kitchen or etc. are actions that materially add to the value of the property or substantially prolong its life. The cost of repairs on your rental condo can be written off in the year you pay them. As you had no income in 2010, then you may not claim your repair costs on Schedule E on 2011 return. List the total of your expenses for repairs on Schedule E, line 14. Repairs,i.e., repainting, fixin leaks or replacing broken windows or etc. on the other hand, just keep the property in good operating condition.