Depreciation schedule for Kitchen Appliances/Cabinets and Bathroom Fixtures Renovation

Forum|Forum|2 years ago
September 25, 2023
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I renovated a kitchen and two bathrooms and then put a rental property into service. I've read appliances can be depreciated over a 5-year schedule and kitchen cabinets over 7-years.

How are kitchen countertops depreciated? How about bathroom fixtures?

Are there any downsides to using a faster depreciation schedule on the aforementioned items?

Not A Product Question

Carl

Level 11

Are there any downsides to using a faster depreciation schedule on the aforementioned items?

Depends on your point of view.

Keep in mind that depreciation is not a permanent deduction. When you sell the property you are required to recapture and pay tax on all depreciation taken. One thing to keep in mind about that.

1. Recaptured depreciation is added to your AGI in the year of sale. This has the potential to bump you into the next higher tax bracket. Weather it does or not, depends on the numbers and some other factors.
Typically, anything that becomes "a permanent part of" the structure is classified as residential rental real estate and depreciated over 27.5 years. Now in my view, built in kitchen cabinets become a permanent part of the structure. But the IRS pubs do state they can be classified differently under MACRS and depreciated faster. (in my personal opinion, that would include new countertops).
However, I prefer to keep my depreciation as low as I legally can, so as to reduce the chance a future recapture will bump me into the next higher tax bracket. Buy that's just my preference. Your preference may (and can) be different.

burgerguy14Author

Level 4

@Carl11_2 Thanks for the rundown. I didn't really understand depreciation recapture. Your post has made me create some mock scenarios in Excel in which I sell the property 10 years down the line.

The depreciation recapture tax rate is going to be very high regardless of what I do now, but accelerating depreciation of cabinets is not helping my wallet.

B/c I am semi-retired and have only interest, dividends, and small rental profits (mandatory depreciation) I am in a very low bracket. Increasing my expenses by depreciating cabinets now, and thereby decreasing my rental income is not really beneficial for me.

Thanks!!!