Replaced sewer line and financing payment - what is the correct approach for taxes?

[Ron Brady]

In July we replaced a broken sewer line for $8,500. We have 0% financing for 12 months. We have the cash to pay it now, but with 0% financing, we are in no rush to give up our cash.

1.  Is this a capital expense to be depreciated? We assume yes.

2. Can we use 60% bonus depreciation on this or no?

3. Do we have to pay off the financing by December 31 to have it apply to the 2024 tax year?

4. Are there any other tax implications to this?

Thank you, tax experts!

[Joshua Thompson]

Hi Ron, 

In most cases, it will need to be capitalize and depreciated over 15 years (some will say 27.5). I believe there is an exception if it's a municipal sewer but would need to look more into this as it's usually a special situation. Typically a credit card balance does not need to be paid off to include the expense on the current year return. Typically 15 year property can qualify for bonus depreciation.

I use the word typically and usually a lot because I highly recommend you speak with your accountant to get specific information about your situation. The answers could change with additional information and I do not recommend you use the above without consulting your a tax professional first.