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De Minimis Expenses for a Rental Property

Forum|Forum|1 year ago
March 15, 2025
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I have two daughters who own a rental property. Last year they had to replace two windows (less than $2,500 each), replace a patio door (>$2,500), replace a dishwasher, and replace a microwave. I have read on this forum the various remarks concerning expensing versus improvements versus the de minimis expense route. Can these items listed above be considered purchased property for de minimus expensing? If so, is a separate listing of same required to be mailed to the IRS, if one is e-filing the return? What is the procedure for entering these expenses, if they so qualify, into Schedule E?

Best answer by DianeW777

Line 18 should never have to be changed or split up. The depreciation should be calculated by entering half the cost of the rental on each daughter's return. If this is corrected in the asset section of the rental on each return the correct depreciation will populate on each return, each year.

The DeMinimis Safe Harbor (DMSH) is not the only expense that can be listed on line 19. The fact the the sisters own the house 50/50 doesn't mean they can take double the $2,500 threshold. It's the same house and the same rental so if the expenses are greater than $2,500 then they must depreciate the assets. @MonikaK1 described in the detail the DMSH, which applies to assets, other than the building itself.

The other option, if there are capital improvements, would be the Safe Harbor Election for Small Taxpayers

Here are the rules you need to meet to take this election for capital improvement:

Your gross receipts, including all your other income, are $10,000,000 or less.
Your eligible building has an unadjusted basis of $1,000,000 or less.
The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits:
- 2% of the unadjusted basis of your building or
- $10,000

If you find you do qualify for this option and you want to take the full expense in one year for capital improvements, use the steps below to enter it in your return. Again, keep in mind this is one property, being divided by two taxpayers.

@GGBJr

M

MonikaK1

The IRS does allow the expensing of certain items up to $2,500 without having to depreciate them. TurboTax asks questions in the rental interview to help you identify which items to treat as assets subject to depreciation versus current-year expenses. You can enter them this way in TurboTax; you don't have to send anything separately to the IRS.

Rental property is considered a depreciable asset, as are major improvements such as new roofs, landscaping, refrigerators, water heaters, furniture, and so forth. Depreciation lets you deduct the "used up" part of an asset's cost year after year, until the entire cost is used up or you no longer own it. It provides for wear and tear or obsolescence of the property or asset.

Depreciation deducts the asset's cost over time rather than deducting it all at once, as you would when deducting an expense.

Expenses are used to deduct the entire cost of services, utilities, fees, and consumable items (like cleaning supplies, light bulbs, smoke alarms, and batteries).

See this TurboTax help article and this one for more information.

De Minimis Safe Harbor Election

This election for items $2,500 or less is called the De Minimis Safe Harbor Election. This election is an option you can take each year that lets you write off/deduct items $2,500 or less as expenses instead of assets. Expenses typically reduce your income by a larger amount than depreciating an asset over multiple years does. This means you could get a bigger refund.

If you decide to take this option, a form called De Minimis Safe Harbor Election will show up in your tax return. This election will apply to all your businesses, rental properties or farms.

Here are the rules you need to meet to take this election:

You don't have an applicable financial statement (most people don't).
You have a consistent process for how you record expenses and assets.
You record these items as expenses on your books/records.
The cost of each item as shown on your receipt is $2,500 or less.
Rental Property select Edit > Other expenses > Other Miscellaneous Expenses
Enter Description (Safe Harbor ...) and amount (not entered as assets under this election)

Note: Because you are under the $2,500 threshold, you are not required to used section 179. You can list these expenses under Miscellaneous. If the amount was over 2,500, then you would enter these as assets and then would be able to choose the 179 option.

Maintain a complete record with your tax return should you need to verify these items at a later time, this should include your receipt.

To record this in TurboTax use the following steps.

When you come to the screen, under Assets (no you don't want to go directly to the asset summary) Did you buy any items that each cost $2,500 or less in 2020? mark the Yes button and click Continue.
On the screen Let's see if you qualify to deduct these items as expenses, mark both of the Yes buttons and click Continue.
On the Now, let's review each item you bought screen, mark whether all your new assets cost $2500 or less.
If you mark that every item cost $2,500 or less, you will be brought to the Asset Summary screen. You have elected the De Minimis Safe Harbor provision.
1. Here's how to add your purchases that are $2,500 or less as Miscellaneous Expenses:
2. Select Add Expense or Asset (may have to scroll ) if you have not already added Miscellaneous Expenses > Continue
3. Choose Other miscellaneous expenses.
4. If you already have Miscellaneous Expenses then click Start or Update > Enter the description and amount
5. Or select Add another row to add description and amount

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

G

GGBJrAuthor

I regret not having seen your post before today, since I had not received a message from TT.

Many thanks!

I am wondering whether I have a potential problem using DeMinimis on Schedule E. Our two daughters jointly own the house, and they do a 50-50 split of all expenses. In past years, when not using De Minimis, the Depreciation line (18a) refuses to split the $15,000 in depreciation expense. The same amount appears in the third column from the left. Hence, in past years, I have always entered depreciation expense on line 19a under Other Expenses, where TT does split the amount. However, with De Minimis activated, is the IRS going to disallow the expense, because it is greater than $2,500? Does the activation of De Minimis automatically treat all entries on line 19 to ensure that they are below the $2,500 threshold? To get around this, must I split the depreciation expense on line 18a, thereby entering the same amount on both of the girls' Schedule Es? Or, is there a TT problem on why the line 18a entry is not automatically split?

Thanks for your help, for sure!!

D

DianeW777Answer

Line 18 should never have to be changed or split up. The depreciation should be calculated by entering half the cost of the rental on each daughter's return. If this is corrected in the asset section of the rental on each return the correct depreciation will populate on each return, each year.

The DeMinimis Safe Harbor (DMSH) is not the only expense that can be listed on line 19. The fact the the sisters own the house 50/50 doesn't mean they can take double the $2,500 threshold. It's the same house and the same rental so if the expenses are greater than $2,500 then they must depreciate the assets. @MonikaK1 described in the detail the DMSH, which applies to assets, other than the building itself.

The other option, if there are capital improvements, would be the Safe Harbor Election for Small Taxpayers

Here are the rules you need to meet to take this election for capital improvement:

Your gross receipts, including all your other income, are $10,000,000 or less.
Your eligible building has an unadjusted basis of $1,000,000 or less.
The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits:
- 2% of the unadjusted basis of your building or
- $10,000

If you find you do qualify for this option and you want to take the full expense in one year for capital improvements, use the steps below to enter it in your return. Again, keep in mind this is one property, being divided by two taxpayers.

@GGBJr

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

M

MonikaK1

The IRS does allow the expensing of certain items up to $2,500 without having to depreciate them. TurboTax asks questions in the rental interview to help you identify which items to treat as assets subject to depreciation versus current-year expenses. You can enter them this way in TurboTax; you don't have to send anything separately to the IRS.

Rental property is considered a depreciable asset, as are major improvements such as new roofs, landscaping, refrigerators, water heaters, furniture, and so forth. Depreciation lets you deduct the "used up" part of an asset's cost year after year, until the entire cost is used up or you no longer own it. It provides for wear and tear or obsolescence of the property or asset.

Depreciation deducts the asset's cost over time rather than deducting it all at once, as you would when deducting an expense.

Expenses are used to deduct the entire cost of services, utilities, fees, and consumable items (like cleaning supplies, light bulbs, smoke alarms, and batteries).

See this TurboTax help article and this one for more information.

De Minimis Safe Harbor Election

This election for items $2,500 or less is called the De Minimis Safe Harbor Election. This election is an option you can take each year that lets you write off/deduct items $2,500 or less as expenses instead of assets. Expenses typically reduce your income by a larger amount than depreciating an asset over multiple years does. This means you could get a bigger refund.

If you decide to take this option, a form called De Minimis Safe Harbor Election will show up in your tax return. This election will apply to all your businesses, rental properties or farms.

Here are the rules you need to meet to take this election:

You don't have an applicable financial statement (most people don't).
You have a consistent process for how you record expenses and assets.
You record these items as expenses on your books/records.
The cost of each item as shown on your receipt is $2,500 or less.
Rental Property select Edit > Other expenses > Other Miscellaneous Expenses
Enter Description (Safe Harbor ...) and amount (not entered as assets under this election)

Note: Because you are under the $2,500 threshold, you are not required to used section 179. You can list these expenses under Miscellaneous. If the amount was over 2,500, then you would enter these as assets and then would be able to choose the 179 option.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"