Question

Partial Home Rental Expenses for 3 months renting

Forum|Forum|5 years ago
December 23, 2020
1 reply
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Hi,

I have rented out 50% of my home for the last 2 years and I have had no issues filing taxes. This year is a bit different.

I had a renter from January 1 to March 15. During that time, I had to make some repairs - replace the water heater, etc. Am I allowed to claim 50% of that water heater as a business expense since it was replaced February 8th? I have not had another renter and do not anticipate having another one. Do I treat that repair as a business expense because it was during the period that I had someone renting from me?

Thanks in advance!

Not A Product Question

Carl11_2

Employee

When it comes to rental property, water heaters are in a grey area.

That would becomes "a permanent physical part" of the structure must be capitalized. Technically speaking, a water heater does become a permanent part of the plumbing system, which is a permanent part of the structure. But depreciating a $700 water heater over 27.5 years makes absolutely no difference in the tax liability. Not one single penny. In my personal opinion its just downright stupid.

In your case, since it's use was not 100% business use,I would claim 3/12 of 50% of it's cost as a repair expense. Explanation:

The property was 50% rental. if the new water heater costs $1000 then 50% of that is $500. But the water heater was only business use for 3 out of 12 months of the year. So 3/12 of $500, or $125 is what I would claim as a repair expense and be done with it. If you replaced it say Feb 1st, then there's only two months of business use. So that would be an $83.33 repair expense.

Now me personally, since there is no intention of renting any portion of the property for the foreseeable future, I wouldn't bother with claiming anything for this on SCH E.

It makes no sense to list it as an asset, since it will have been "in service" for less than 3 months for the rental.