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I have rental properties, and i need to know how to use de…

I have rental properties...

I have rental properties, and i need to know how to use de minimus safe harbor

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

If i choose to use de minimus safe harbor, do i just expense all my items that are under 2500 dollars and do not enter them in the depreciation section

Accountant's Assistant: Is there anything else important you think the Accountant should know?

How would i handle the purchase of a heat pump for my rental $4348

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Answered in 15 minutes by:
3/24/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,362
Experience: Taxes, Immigration, Labor Relations
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How do you elect to use the de minimis safe harbor?

You should attach a statement titled "Section 1.263(a)-1(f) de minimis safe harbor election" to the timely filed original federal tax return including extensions for the taxable year in which the de minimis amounts are paid. The statement should include your name, address, and Taxpayer Identification Number, as well as a statement that you are making the de minimis safe harbor election. Under the election, you must apply the de minimis safe harbor to all expenditures meeting the criteria for the election in the taxable year.

.

The de minimis safe harbor is simply an administrative convenience that generally allows you to elect to deduct small-dollar expenditures for the acquisition or production of property that otherwise must be capitalized under the general rules.

So you will deduct these costs as you normally would do - as repairs, supplies, etc.

If that specific item doesn't fit any of listed category - list in attached statement for line 19 schedule E.

Do not use depreciation deduction.

how would i handle the purchase of a heat pump for my rental $4348

This will be capital expenditure and will be depreciated as a separate asset over 27.5 years if that is installed in your residential rental.

Questions?

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Customer reply replied 4 months ago
what depreciation method options do i have? can i choose macrs 200db?
Customer reply replied 4 months ago
i'm fine to chat at present

If that heat pump is permanently attached to the property - you will use the SAME depreciation method as the underline property.

Residential Rental Property -- Mid-Month Convention -- Straight Line — 27.5 Years

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Customer reply replied 4 months ago
we had major renovations this year on this property totaling over 20k, do i have to limit my safe harbor expense deductions to 10k and then depreciate the rest?would i have to elect to choose the de minimus safe harbor for each of the subsequent years on my return as well?am i required to provide 1099-misc to sub contractors that did the renovations if i paid them over $600? i have seen some info that i don't and some that i do. do i have to meet certain requirements
Customer reply replied 4 months ago
when would i be able to use the macrs db200 method? on any item or are there certain limitations on it's use?

major renovations must be capitalized... There is no 10k limit...

We may not use safe harbor for major renovations...

That will be subject to uniform capitalization rules.

am i required to provide 1099-misc to sub contractors that did the renovations if i paid them over $600?

In general - the IRS considers most rental activities to be passive activities, rather than active businesses.

Based on landlords should be exempt from filing form 1099 to contractors.

However - the IRS doesn't state that clearly and the question about 1099 is listed on Schedule E...

So - it is not clear how the IRS will view on that...

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Customer reply replied 4 months ago
for major renovations i would have to use 27.5 years and macrs straightline method or could i choose DB200 or something else?
Customer reply replied 4 months ago
for these renovations we purchased many items under 1000 dollars, are these eligible for write-off in 2017 using de minimus safe harbor or must they all be grouped into the renovations amount and depreciated as one depreciable item over 27.5 years using macrs straightline since the original building is 27.5 straightline? i think it's ok to separate any items on a shorter schedule like appliances, etc.

You may use different depreciation schedule for separate items that are not permanently attached to the building.

For instance - if you have a refrigerator - it will be depreciated separately.

In additional the IRS specifically allows 5-year depreciation schedule for carpeting.

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Customer reply replied 4 months ago
can you use the 200db which gives half depr in the first year for appliances and anything that is not attached to the building? is this something new this year and are there disadvantages to using that method
Customer reply replied 4 months ago
dep27.5 Mike's Heating and Cooling new heat pump#9 $4,345.26
dep27.5 lowes vanity $212.43
dep27.5 Restore cabinet #9 $37.54
dep27.5 lowes #9 flooring supplies $1,716.77
dep27.5 Home Depot lights $117.33
dep27.5 Home Depot lights #5 $117.33
dep27.5 lowes back splash $152.34
dep27.5 lowes flooring hot water heater,bath tub &surround,microwave #5 $3,175.15
dep27.5 Patrick Crawley #9 renovations $7,397.76
dep27.5 Judith McElrath #9 renovations $2,000.00
dep27.5 Judith McElrath #5&9 yard $4,985.00
dep27.5 Home Depot lights #9 $117.60
dep27.5 Patrick Crawley #9 renovations $9,500.00
dep27.5 Lowes #5 kitchen cabinets $443.19
dep5 lowes dishwasher $213.50
dep5 Lowes, via JE credit card stove, microwave #9 $418.37this is an example of my renovation expenses, do they all except appliances have to be bundled in renovations and depr over 27.5 years like the orig building?

an you use the 200db which gives half depr in the first year for appliances and anything that is not attached to the building?

Yes - for separate appliances - you may use bonus depreciation and section 179 depreciation - and may deduct up to the full cost in the year they are placed in service.

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Customer reply replied 4 months ago
i thought you could only use section 179 for personal property that is used outside your rental not inside? is that correct?
https://www.nolo.com/legal-encyclopedia/section-179-expensing-rental-property-owners-deduct-long-term-asset.html

i thought you could only use section 179 for personal property that is used outside your rental not inside? is that correct?

"personal" property in this content - means "not real property".

That is not related to personal use property - than must be a property used for business.

A refrigerator is a personal property - not real property.

If used for rental activity - section 179 is allowed

but if used for you personal purposes - no depreciation and no section 179.

Lev
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Satisfied Customers: 33,362
Experience: Taxes, Immigration, Labor Relations
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Customer reply replied 4 months ago
how would you handle all of the expenses i mentioned above pertaining to my renovation?
Customer reply replied 4 months ago
dep27.5 lowes vanity $212.43
dep27.5 Restore cabinet #9 $37.54
dep27.5 lowes #9 flooring supplies $1,716.77
dep27.5 Home Depot lights $117.33
dep27.5 Home Depot lights #5 $117.33
dep27.5 lowes back splash $152.34
dep27.5 lowes flooring hot water heater,bath tub &surround,microwave #5 $3,175.15
dep27.5 Patrick Crawley #9 renovations $7,397.76
dep27.5 Judith McElrath #9 renovations $2,000.00
dep27.5 Judith McElrath #5&9 yard $4,985.00
dep27.5 Home Depot lights #9 $117.60
dep27.5 Patrick Crawley #9 renovations $9,500.00
dep27.5 Lowes #5 kitchen cabinets $443.19
dep5 lowes dishwasher $213.50
dep5 Lowes, via JE credit card stove, microwave #9 $418.37

Probably not intentionally - but you blocked me from posting on this page,

and it took some time to gain the assess back.

All these expenses look as made BEFORE the property is available for rental - as these are major remodeling expenses.

We may not deduct any expenses if the property s not yet placed in service.

All these are capitalized - and ADDED to the basis of teh porperty.

So - you will start depreciation deduction when the property is placed in service.

If you are looking for faster depreciation - some items which are not permanently attached to teh building may be depreciated separately.

For instance - I see in your list - stove, microwave - these are depreciated using 5-year schedule.

Let me know if you need any help.

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Customer reply replied 4 months ago
I have a vacation rental home and in preparation for getting it ready I have purchased dishes silverware vacuum cleaners various items. Can I expense these or do they have to be capitalized? I put the rental in service last October however I didn't have any renters at the end of last year because it was out of season. But if I read correctly I still can take depreciation for the time that it was in service. Thank you

I have purchased dishes silverware vacuum cleaners various items. Can I expense these or do they have to be capitalized?

You may expense all these items when they are placed in service.

I put the rental in service last October however I didn't have any renters at the end of last year because it was out of season. But if I read correctly I still can take depreciation for the time that it was in service.

Yes - that is correct - you may consider the property as placed in service when it is available for rental.

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