I just purchased 2 single family homes as rentals and there are some items I was wondering how you get the correct tax deduction. I am somewhat familiar with taxes, and bonus depreciation, etc, but just needed more clarity on what goes where.
Replaced Waterheater - is this a 27.5 year depreciation or is there a way to expense (~$2700)
Replaced floors with floating vinyl floors (~$3600)
New Appliances (~$2,400)
Lots of misc, painted whole house, new hardware - I assume all of that is probably an improvement rather then repair?
Investor · Rochester, NY · Member since 2016 · 576 posts · 358 votes
4y
The way I have read the law, (which isn't specific, few specific examples. A new roof and a new furnace seem like the only examples I can remember being mentioned as having to be depreciated) is that you get some gray areas of interpretation. You decide how long you think certain repairs will last. Painting certainly doesn't last for decades, expense that. Most floors don't last for decades, expense that. Appliances are expected to last about 7 years (that's what my last appliance salesman told me) expense that. I've never heard of a $2700 water heater. If you paid that much because its made out of some material that never fails, then depreciate it, otherwise it's a maintenance cost and should be expensed.
And, of course, run this all by your tax professional.
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
4y
$2700 for a water heater?.. reading that made my brain hurt.
You have a mix of CapEx and maintenance items. My understanding is any repairs made should be expensed but upgrades to the property and must be depreciated over 27.5 years. You can't expense all new flooring, new roof, remodeling the entire _____ , or "painted whole house".
Ok so it was $2700 for the waterheater and its installation, including correcting 20 years of no maintenance, fixing a red rag by the gas co, and fixing the chimney pipe. I am out of state so it seems like everyone takes advantage of me where they can! Haha.
Back to taxes, should I expense stuff if there was no income from the property yet? Purchased last fall and didnt rent until this year.