Residential Rental Questions

[GraceNY]

New client.  Taxpayer owns 1 residential rental.  Tenants in upstairs and downstairs apartment.

On his worksheet he lists the following and my query follows in parenthesis. Looking for an agree, disagree or a WWYD.

Hot water tank - $575  ( A structural component and therefore depreciated over 27.5 years?) Which, if so, seems ridiculous.

Refrigerator - $ 1,100 (An appliance on which the bonus depreciation can be taken?)

Listed as a repair, roof drain plugged up and damaged kitchen floor.  $5,500 to remove and replace floor and sub-floor (A repair or improvement?)

Lastly, on his 2018 tax return a new roof in the amount of $12k was expensed under Section 179.  I thought it had to be NON-Residential in order to use the Section 179 deduction?

Thanks in advance for any input.

Grace

 

 

 

 

 

[Gail in Virginia]

Personally, I would expense the water heater as de minimis (under $2500 or 2% of the cost of the property), depreciate the refrigerator as an appliance, with bonus depreciation or 179 available , and capitalize the flooring as a restoration.  I would not have used 179 on a structural component like a roof. 

However i an not an expert on rental property and did not look up cites for any of this, so someone else may know more and give you a better answer. 

[grandmabee]

I would bonus both the hot water tank and the refrid.  I also would depreciate the floor under 27.5.  I do not/cannot take 179 on residential rentals.

[Catherine]

If the floor and sub-floor were destroyed, I would expense that cost as a repair.  Any part above and beyond restoring the floor to usable condition (how worn out was the floor previously?) would be capitalized as an improvement.  But the restoration is repair; an apartment must have a sound floor.

De minimis expense on the water heater.

Fridge I'd either take bonus depreciation or just depreciate without the bonus; it might help more in future years to have the deduction then, in years without the huge repair costs.

New roof not eligible for Section 179 expense on a rental.  Amend 2018 (two years of incorrect usage to have to file 3115, so lucky to catch it in year two), continue on to 2019.

[Abby Normal]

Hot water heater expense-de minimus

Refrigerator expense-de minimus

Floor-repairs

Roof was a repair. No need for 179.

[Max W]

Most people when referring to a "new roof" are talking about the roof covering and not the roof structure. Whether the roof is a repair, or improvement might depend on the type of roof covering and whether it is replaced with something different, or better.  Asphalt shingle,  tar and gravel, shake/wood  shingle, foam covering, slate, spanish tiles.

[Terry D EA]

I work with rental properties all the time. I have to agree with Catherine. The floor replacement is a repair to return the floor to usable condition. if the original floor were a vinyl floor and replaced with a hardwood, then the difference would be capitalized as an improvement. No 179 deductions are permitted with rental property. De-minimis the water heater as suggestion. Take the bonus depreciation on the fridge. 

[ADK2ATX]

On 4/10/2020 at 10:01 AM, Terry D said:

 De-minimis the water heater as suggestion. Take the bonus depreciation on the fridge. 

This seems correct to me, but would it be "incorrect" to use the De Minimus Safe Harbor for both the water heater and the refrigerator?

[Catherine]

On 4/12/2020 at 10:41 AM, ADK2ATX said:

This seems correct to me, but would it be "incorrect" to use the De Minimus Safe Harbor for both the water heater and the refrigerator?

Nope; they each qualify.