section 179 depreciation and hot water heaters?

Question

Can I use 179 depreciation (or Bonus depreciation?)  in the new tax law to write off a hot water heater in one year?  Or do I still need to depreciate it over 27.5 years?

Thanks

Jeff

Jeff J. · Answer

The estimate is around $7000 so it is over the 2500 limit.

I thought the new 2018 tax law now allows 179 and bonus depreciation to be used for residential rental property.  Before rental property was not allowed to use it.

Roger S. · Answer

Did you have to replace a water heater?  Any expense under 2500 dollars can be deducted this year and does not need to be depreciated at all under the de minimus rules.

Paul Caputo · Answer

Generally no that wouldn't qualify. First off section 179 does not apply to rental property. I'm assuming this is a rental because you said 27.5 years which is for rental property and not 39 years which is for commercial property.

On the bonus depreciation also it generally wouldn't qualify. Hot water heaters are necessary for human comfort so they're considered part of the real property, not tangible personal property. Even though it's not gonna last for 27.5 years it has to be there. When you replace it in 10 years you can write off the rest of the remaining depreciation and retire the asset to avoid recapture. In the highly unlikely event that you have multiple water heaters in the building any that are specialized for a specific purpose would qualify for bonus. I've never seen that in a rental property.

That being said there's a bunch of assets in rental property that do qualify for bonus depreciation.