Results 1 to 5 of 5
  1. #1
    Join Date
    Jul 2011
    Posts
    6

    Default Is Replacing a Broken Appliance a Rental Expense

    If I replace a broken appliance, is it considered as an improvement or expense for rental expense purposes? I read many examples online but none deals with appliances. I read, for example, replacing a leaking roof is considered an expense while replacing an old but functional roof is considered improvement. So with that logic I want to say replacing a non-working appliance is an expense. Is that right?

  2. #2
    Join Date
    Sep 2005
    Location
    Behind a Desk
    Posts
    74,902

    Default Re: Is Replacing a Broken Appliance a Rental Expense

    If you purchase an appliance for a rental property, it is a depreciable asset.

  3. #3
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    1,904

    Default Re: Is Replacing a Broken Appliance a Rental Expense

    You must depreciate an appliance because it lasts more than a year. If you repair a broken appliance, that is an expense. Appliances are personal property. Roofs attached to houses are real property.

  4. #4
    Join Date
    Mar 2008
    Posts
    1,995

    Default Re: Is Replacing a Broken Appliance a Rental Expense

    Quote Quoting teshub
    View Post
    If I replace a broken appliance, is it considered as an improvement or expense for rental expense purposes? I read many examples online but none deals with appliances. I read, for example, replacing a leaking roof is considered an expense while replacing an old but functional roof is considered improvement. So with that logic I want to say replacing a non-working appliance is an expense. Is that right?
    I was waiting for some feedback on this issue here, as I owned rentals for 30 years, and this issue came up from time to time. I don't want to get into any arguments with anyone here, just to mention how my current policy was developed.

    For the first 15 of those years, I had depreciated all of my carpeting, hot water tanks, appliances for my rentals, even for items as small as $100.00. I started with one CPA who retired, did it myself for a number of years after that, and for the last 15 years, went through 2 CPA's.

    Around 12 years ago, I had nearly a hundred items depreciated, with a good number of hot water tanks and carpeting, and got confusing, with the list expanding each year. I mentioned these two items because apparently I was depreciating carpets over 5 years, many lasted only 3, so I had to write-off the balance and book the new asset. Hot water tanks were assigned a life of 10 years, because they came with 10 years warranties, yet many lasted only 7 to 9 years. In fact, I just got a replacement tank this year almost for free (I paid $265.00 for shipping and an upgrade with a warranty) because the tank lasted 9 years and 7 months.

    So about 12 years ago, my current CPA told me that generally a limit is set for items to be expensed if it's less than a certain amount, such as $600.00. I asked him if it is the "Sec. 179 election", but he advised me that it is not as it does not apply to rental properties. None the less, he tells me that this rule is applied by him and others.

    While this did not solved my problem with carpeting, it simplified things for appliances.

    A few years ago, some issues came up, and I posted this similar question on a "real estate forum", and other expressed similar experiences of expensing small appliances. One fellow in fact had his taxes audited by an IRS auditor who did not find fault with him expensing smaller appliances under a few hundred dollars, but found fault with him expensing his usual $1,200 and up paint jobs telling him paint jobs should last at least two years and should be depreciated as such. He asked in that thread if anyone heard of paint jobs being depreciated, but none of us had.

    So the long and short of it is currently I had been expensing items under $600, and in recent years, I noticed when my taxes were done, some years he had it down that tax laws for that years allowed expensing, though I don't recall what year it was. However, even with that discussion from that forum a few years ago, no one was able to point me to any IRS guidelines saying smaller items can be expensed and for how much, though for the last dozen years, the cut-off point my CPA used was $600.00 and that's the way it's been done. And I did not start depreciating any paint jobs, though it was reported that at least one IRS auditor in PA thought it should be the case.

  5. #5
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    1,904

    Default Re: Is Replacing a Broken Appliance a Rental Expense

    While companies and CPAs do what you've described, there is nothing that allows it in the IRS publications, instructions, or in the tax law. Of course it does get ridiculous at a point. An office stapler lasts over a year, but I can't imagine depreciating a $6 stapler.

    Examiners can and do make mistakes. The example of repainting a house is specifically cited in the IRS publications as an example of a repair and not a capital investment. Reroofing, on the other hand, is a capital improvement that requires depreciation. It doesn't always have to make sense, I guess.

    1. Sponsored Links
       

Similar Threads

  1. Defective Products: Broken Finger Using Rental Equipment
    By larbec in forum Accidents and Injuries
    Replies: 10
    Last Post: 06-08-2009, 12:11 AM
  2. Private Sales: Can I Return a Broken Appliance
    By wewatch2 in forum Consumer Law
    Replies: 1
    Last Post: 05-14-2009, 04:22 AM
  3. Moving Out: Landlord Appliance Damage
    By lwon034 in forum Moving Out
    Replies: 1
    Last Post: 05-12-2009, 10:16 AM
  4. Arrest Warrants: Rental Contract Allegedly Broken, Arrest Warrant Issued
    By eldorado345 in forum Criminal Procedure
    Replies: 9
    Last Post: 06-20-2008, 05:58 PM
  5. Change of Ownership: Sale Or Rental At A Higher Price As Cancelling A Broken Lease
    By radman in forum Living in the Rental Unit
    Replies: 3
    Last Post: 02-18-2007, 09:48 AM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  
 
Forum Sponsor
Free Tax Forms
Download free federal tax forms.




Untitled Document