State tax filing

1. No, the De Minimis Safe Harbor Election and the Safe Harbor Election for Small Taxpayers apply to rental units as well as all other businesses or farms reported on your tax return.
2. The two receipts exceeding $2,500 would not be eligible for the De Minimis Safe Harbor Election because of being over $2,500. For the Safe Harbor Election for Small Taxpayers which would apply for building improvements, here are the rules you need to meet to take this election:
   1. Your gross receipts, including all your other income, are $10,000,000 or less.
   2. Your eligible building has an unadjusted basis of $1,000,000 or less.
   3. The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits: 
      • 2% of the unadjusted basis of your building or
      • $10,000

Keep in mind that "Leasehold Improvements" include improvements to buildings owned or leased. It is a definition that makes the expense eligible for depreciating the amount over a 15 year life, rather than 27.5 years.

Please see this excellent summary to help categorize these expenses: @TurboTax Expert Alum RobertG's response Leasehold Improvement Deprecation.

TurboTax defines improvements as:

You paid for an improvement to your property if you spent money to enhance your property, restore your property, or adapt your property to a new or different use. 

Examples of improvements include:

- Installation of new plumbing or wiring
- Addition of paneling to a room
- Installation of a fence
- Paving of a driveway
- Installation of new cabinets
- Addition of a new roof
- Assessments for streets, sewers, and sidewalks
 

TurboTax will properly classify these expenses by how the questions are answered. To do this in TurboTax,

1. begin by adding the expense. In your rental reporting, scroll to the expenses and check Add Expense.
2. At What additional expenses and assets did you have, under Assets, check the box for  Improvements, furnishings, and other assets and Continue.
3. If you are returned to the rental summary, scroll to Rental property under EXPENSES/ASSETS (DEPRECIATION): Assets and select Edit.
4. At Depreciation for Your Rental Property, select Yes to Do you have assets for this property that can be depreciated?
5. Follow through the prompts answering according to your circumstances. The improvements are for Rental Real Estate Property.

The depreciation treatment including eligibility for Section 179 and/or Bonus Depreciation will depend on what made up the contractor expenses for how to classify the improvement. There are three options.

• If it is residential rental real estate itself, the portion that is not land must be depreciated over 27.5 years. This would not apply for improvements.
• If they included new appliances, carpet and furniture, then it could be eligible for Section 179 and/or Bonus depreciation. 
• If the expenses were for Land Improvements, then they could be eligible for the Special Depreciation Allowance (Bonus) which would allow for a 100% deduction.
  • Keep in mind that there may be different state tax treatment: Some states conformed to the Federal 2008 Stimulus Bonus Depreciation: Special Depreciation Allowance, while others did not. The states that treat this Special Depreciation Allowance differently are:
    • 
       - Alabama
       - Arizona
       - Arkansas
       - Connecticut
       - District of Columbia
       - Georgia
       - Hawaii
       - Illinois
       - Indiana
       - Iowa
       - Kentucky
       - Maine
       - Maryland
       - Massachusetts
       - Minnesota
       - Mississippi
       - New Hampshire
       - New Jersey
       - New York
       - North Carolina
       - Ohio
       - Pennsylvania
       - Rhode Island
       - South Carolina
       - Vermont
       - Virginia
       - Wisconsin

For more information, see: IRS summary of the Safe Harbor Election for Small Taxpayers and the Tangible Property Final Regulations.

@Artisan