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Jim Revels
Jim Revels, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 210
Experience:  Providing income tax / planning services for over 16 years on all entity and individual tax issues
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formula for depreciation on rental property

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In 2006, I rented a small house I own for $500.00 per month rent. From the annual rent of $6000.00, I deducted utilities,                                   
property taxes and mortgage interest I paid on the house. I then came to depreciation and called the IRS because the                                    
innstructions were gruesome. I was told to start with the cost of the house, $16,364.45, add in repairs cost of $1,258.72 for a total                                   
of $17,623.17. Divide the total by 27.5 years for a total deduction of $640.84 annual depreciation, which would always be the same.                                    
But my repairs for 2007 are only $538.50. If I remove the '06 repairs and insert the '07 repairs, I will change the supposed fixed                                    
$640.84 yearly depreciation. Likewise, if I leave the '06 repairs and add the '07 repairs to it, I will also change the fixed                                    
$640.84 yearly depreciation. In reading the recommended publications 523, 527 and 649, I cannot find where this is addressed.                                    
In reading recommended publications 532, 527 and 649, I cannot find this addressed. Presumably, in my advancing years, I am                                   
unable to comprehend instructions as before. Please advise, what is the proper way to figure depreciation with the ever-changing                                    
annual costs of repairs? Thank you.                                   
Submitted: 6 years ago.
Category: Tax
Expert:  Jim Revels replied 6 years ago.

Thankyou for choosing Just Answer. I have an easy remedy for you. When looking at the "repairs for 2007" if the repairs were replacing a water heater, light fixture, counter top, dishwasher, etc....these need to be depreciated, THe way to show this is enter in a new line item under the property call it improvements and take them over the useful life of the asset. water heater = $500/10 years $50 a year.

 

If these are truly repairs, fixed door knob, pay a plumber, these repairs should be expensed not depreciated.

 

Kindest regards.

Customer: replied 6 years ago.
Reply to Jim Revels's Post: The repairs were for repairing an air conditioner that stopped working twice. What would that fall under? If it is something I should depreciate under the 27.5 years, do I add it to the cost of the house, as I did last year? Do I use last years adjusted cost of the house, plus repairs? If it does not fall into that category, do I simply show it under the same list of other deductions?
Expert:  Jim Revels replied 6 years ago.
Those are repairs and should mot be depreciated. There is a line on schedule E for repairs and maintenance. That is the line you should report the air conditioner expense.
Jim Revels, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 210
Experience: Providing income tax / planning services for over 16 years on all entity and individual tax issues
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