IRS Rules for improvement to rental property

3 Replies

I am adding a fence to a rental property which is on a pond.  It is presently rented to an adult couple, but we want to open it up to families with children.  1) Somewhere I read that for Rental property "improvements" that are under $2500 they can be expensed or written off in the year of payment.  I can not find such a rule in the IRS publication.

Also, @Amanda Han , in her informative post on the new tax law seemed to indicate that such purchases after September 27, 2017, could be now fully written off.  I assume in the 2017 tax return for such end year expenses.

Can anyone add to or direct me to info on either of these?

Thanks.

Cheers,

Buddy

@Buddy Holmes

You are right. The Fence qualifies for bonus depreciation of 100% that is done after 09/27/17. 

However, using de minimis safe harbor-  you can elect to expense everything below 2500- is more beneficial if the total fence expense is below $2,500 rather than electing 100% bonus depreciation. 

Depreciation has to be recaptured later if you sell the house, but safe harbor is an actual expense, not the depreciation.  

Thanks @Ashish Acharya !

And the 100% bonus for this expense in 2017 is taken on the 2017 Return, correct?

Disagree with @Ashish Acharya on this one. 

There is no difference between the two methods when you sell. Either way, the basis of the fence will be zero, resulting in the exact same tax consequences.

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