Investor · Saint Paul, MN · Member since 2011 · 12 posts · 2 votes
I recently purchased a useful tool for use in the care of my five single family homes. Clearly the useful life of this tool requires me to expense the cost of the tool over several years. Do I just tack this to one of the houses and depreciate it over whatever years or should I split it into a $10 asset per property and then depreciate it?
It seems to me that anyone holding properties long-term would end up with dozens and dozens of depreciation schedules over the years for all sorts of things that would be considered "improvements". Thankfully I am savvy in Excel and it is all automated, but doing my taxes each year with so many different things to depreciate takes quite a lot of time.
I believe the IRS allows you to expense things that are cheap enough. I think the limit is $100, but I am not sure about that. As for which property, I believe you just pick one and depreciate it there.
My CPA has lumped such purchases into "small tools" and taken them in the year the moeny is spent.
A good CPA will save you more money than the cost. Its not just a matter of being able to fill out the forms. You have to know how to fill them out. You have to keep with IRS rulings and new rules. If you have enough stuff that you're tracking it in Excel, you really need a CPA.
The typical thought is below $100. However it can depend upon the type of item we're talking about. A washer or dryer you purchased on craigslist for$100 is not going to be expensed due to the nature of the property(yes I have argued that one).
Its an issue of materiality more than anything else and you will need to have a written policy in place that you follow.
If you have one property and collect $400/mo in rent and purchase 5 tools in one year for $100/ea will be far more material than if you had a 100 unit apartment collecting on average $650/unit and spent the same amount.
There are few hard and fast rules here though the temporary regs passed in December will change some of this on your 2012 tax returns.