Hello BP Community, thank you in advance for reading my questions and providing me with your thoughts.

I have recently purchased a duplex and will be renovating both units. I want to focus this discussion on what useful lives I will be able to use on the different expenditures I have during the renovation, once I have completed the renovation and placed in service. All in, we are spending about $50K on the renovation and hitting high value items like kitchens, bathrooms, appliances, lighting, paint and trim, etc.

In section 946 of the tax code, there is a run down of what useful lives you can use when you spend capital on a residential rental property. Generally, appliances and other personal property are in the 5 year useful life bucket and land related upgrades are in the 15 year useful life category. Both are great because it is quicker than the 27.5 years you otherwise would use a a depreciation timeline for those costs. What my question focuses on is the 7 year useful life category, which is partially defined as "Any property that does not have a class life and has not been designated by law as being in any other class."

https://www.irs.gov/publications/p946/ch04.html#en_US_2013_publink1000107513

Each of the expenditures in the below list is based on actual dollars spent by area. My contractor broke down his bill/quote so that I could more easily allocate costs for depreciation purposes (among other benefits of knowing what I am spending by room).

I would like to be able to depreciate each of these expenditures over 7 years but I am not sure if I am allowed to (with the consequential answer placing these depreciation dollars into a 27.5 year bucket):

Screened in Patio: $4,798 - we are destroying a room and turning into a nice screened in patio.

Bedroom renovations: $7,888 - updating bedrooms with new drywall, removing and replacing ceilings, light fixtures, building additional closet space, paint, trim, etc.

Entry way: $4,308 - the shared entry way is a mess right now. We are taking down and replacing all of the drywall, replacing the treads and risers on the stairs and this includes paint, trim, lighting, etc.

Laundry/mudroom renovations: $4,461 - similar to the above, drywall, paint, trim, flooring, some small interior wall changes to closets, etc.

Dining/living rooms: $6,835 - the trend continues except here we are also installing flooring. Drywall, lighting, pain, trim, etc.

Bathroom renovations: $10,731 - complete gut and refinish three bathrooms. Taking each room down to the studs and replacing all finishes, electrical and plumbing, lighting, walls, paint, trim, tile, etc.

Kitchen renovations (excluding separately purchased cabinets): $2,719 - Some electrical work, paint, trim, lighting, etc.

If I am allowed to place all $41,740 in the 7 year bucket, as opposed to the 27.5 year bucket, then I am looking at a year 1 after tax savings of ~$6.4K from depreciation, compared with ~$3.9K in the less favorable scenario. That is a year 1 cash return of difference of ~$2.5K that I am trying to figure out if I get to keep.

Again, I appreciate your input. I understand this is a complicated matter and I am seeking professional advice. I have found BP input very helpful in many questions I've had; I just couldn't find a thread that discussed this type of question.

Wes - Multifamily Real Estate Investor in the Knoxville, TN area (feel free to connect with me if you are in the area or share the same interest).