Replaced carpet, how to report on taxes

5 Replies

For new carpet installed in rental, should I report as expense or capital improvement and depreciate when preparing taxes? 

I've read there can be an argument for either. Of course i would like to expense it but I don't want to draw unnecessary attention from auditors. Anyone have any opinions/experiences?

capitalized and depreciated. 

@Joe Doman typically this would be considered a capital improvement and it should be carried over time.  The simple way to look at this question is: did you repair something or replace something.  If you replaced it then you probably should amortize it.  There are "grey" strategies to fit things into expense instead, like using dollar limits to define generally expensed items vs amortized items.  However, you really should talk to a tax professional about those grey areas if you really want to expense your carpet.  To be clear, I am neither a tax or accounting professional and these are just my opinions and not recommendations.

Good luck,

Arlen

@Joe Doman 

Ask yourself this question:

-- does it increase the value of your property?

-- how much $$$$ value does it increase?

If it does increase the value of the property - consider it as a Fixed Asset for the rentals.

IF you replace the carpets every year with the tenant turnaround - then you should Expense it.

Like Arlen said - "I am neither a tax or accounting professional and these are just my opinions and not recommendations."

Thanks for the help everyone!

Is it a carpet repair or replacement? If new carpet, depreciate over 5 years: 

http://www.irs.gov/pub/irs-pdf/p527.pdf

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