Requesting help in understanding safe harbor applications
Hi BP,
I recently incurred significant expenses for the exterior of one of my properties, and am requesting your assistance in understanding what I may be able to deduct in the current year. I would classify each of the below items as either a betterment, adaptation, or restoration, so it would fall under the 'improvements' side of the 'repairs vs improvements' argument. However, I am hoping to gain clarification as to whether any of these expenses (improvements) would be currently deductible under any of the safe harbor elections.
Here are the facts:
- The basis of the property is $115,000, and is currently in service (tenants are in the property)
- Separately invoiced items:
1. Replace warped boards on deck and house= $350
2. Remove/replace gutters and downspouts= $1100
3. Remove/replace exterior doors= $2100
4. Remove/replace garage door= $1000
5. Remove/replace all windows= $2500
6. Paint entire exterior of house= $2400
7. New stove= $400
TOTAL= $8460
- Here is my logic:
1. safe harbor for small tax payers. I don't think that it falls under the safe harbor for small tax payers, since it exceeds the annual expense limit (2% of $115,000= $2300), and because I must count everything spent during the year, if I exceed the $2300 (which I do), I cannot count any of it towards this safe harbor. In this case, $8460 exceeds $2300, so it renders me unable to use this safe harbor.
2. De minimis safe harbor. The only item that would be considered personal property is the $400 stove. Since the $400 stove is less than $2500, then I may elect to use this safe harbor and deduct the cost of the stove. Can I count any of the other items under the de minimis safe harbor election? I don't think so.
3. Routine maintenance Safe Harbor. Would not fall into this, as they were betterments and restorations.
Based on the above, must I capitalize everything other than the new stove?
Your help is very much appreciated!