Pool resurfacing at rental

[Dave Peterson]

Is resurfacing a pool at a rental property considered a repair or a capital expense for tax purposes?  If the latter, what is the depreciation period?  Thanks.

[Ashish Acharya]

Originally posted by @Dave Peterson:

Is resurfacing a pool at a rental property considered a repair or a capital expense for tax purposes?  If the latter, what is the depreciation period?  Thanks.

Dave,

Indoor pool are considered building. However, outdoor pools are considered land improvements. This distinction is important because the land improvement is 15 your property and even the capital improvement to the land improvement will qualify for 100% bonus deduction. So repair or capital improvement, the outdoor pool will get the same deduction. 

I would suggest capitalizing It to get the asset basis for QBI deduction if you were limited.

If it’s indoor pool, then you would benefit from a repair. However, the complete resurfacing will not be a repair. You have to capitalize the cost and depreciate it over 27.5 or 39 years. 

[Eamonn McElroy]

If you elect DMSH and the cost is over $2,500, you'd capitalize.  15yr GDS on an outdoor pool as Ashish noted.

If you don't elect DMSH you'd apply the BAR rules under the tangible property regs to determine if it is a repair or improvement.

[Dave Peterson]

Thank you both for the feedback.  This is an outside pool and cost is over $2,500.  What is the advantage of electing DMSH?  Also what is BAR?

[Eamonn McElroy]

DMSH is just a book conformity election.  It simplifies tax administration and lowers compliance burden.

BAR stands for "Betterment, Adaptation, Restoration" under the tangible property regs.  They help to determine whether a cost is a repair or an improvement.  Lots of information out there via google.

Also look into the safe harbor for routine maintenance.  Might be some favorable treatment there.  From a bird's eye view, that would be something I'd want to explore if you were a client of mine, but....you're not : ), and we have limited information in this thread.

Disclaimer: This is a complex area of the tax code.  You should always discuss with your tax advisor.