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toofan1
February 27, 2024
Question

Rental property expense or capitalize?

  • February 27, 2024
  • 1 reply
  • 0 views

I bought a booster pump for my rental property that is on the top of the hill for $3,100. Can I expense it for 2023 on Schedule E? What category?

1 reply

Employee
March 19, 2024

I am not really up to date on this, but I will give you a couple suggestions to look into.

 

This discusses expensing vs depreciating

 

https://www.nolo.com/legal-encyclopedia/repairs-vs-improvements-how-tax-deductions-differ-landlords.html

 

In particular it talks about small cost improvements that one might think need to be depreciated saying:

 

The safe harbor for small taxpayers (SHST) allows landlords to currently deduct all annual expenses for repairs, maintenance, improvements, and other costs for a rental building. However, the SHST may only be used for rental buildings that cost $1 million or less. And the annual SHST deduction is limited to the lesser of $10,000 or 2% of the unadjusted basis of the building. This limit is determined on a building by building basis—for example, if you own three rental homes, you apply the limit to each home separately.

 

The IRS says has this page including instructions on how to make the election 

 

https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations#SafeHarborElectionforSmallTaxpayers

 

If you don't find a Schedule E category that makes sense, you can always use "other" and include a description.

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