I am in the process of completing my 2022 tax return.
I spent approximately $7,000 for the installation of a mini-split at my residential rental unit. I was doing my taxes with the anticipation that I will need to claim this as an asset depreciation over the next 27.5 years.
However, when I put the improvement in Turbotax, it brought me to a page about "safe harbor elections". I was under the impression that safe harbor elections may only be $2,500 per invoice. My invoice for the mini-split exceeds that amount. However, it also states:
The safe harbor election for small taxpayers lets you deduct improvements as expenses this year instead of being depreciated over many years.
You can do this if:
- Your gross receipts, including all your other income, are $10,000,000 or less.
- The unadjusted basis (typically, the original cost) of your building was $1,000,000 or less.
- The cost of all repairs, maintenance and improvements is less than or equal to $10,000 or 2% of the unadjusted basis of your building, whichever is lower.
When I clicked "Yes", it now brings me to a page to either expense it for the entire year, or depreciate over many years.
Did the safe harbor election limit get adjusted from $2,500 to $10,000 this year?
I would prefer to take the mini-split deduction all at once versus depreciate it over time. I just want to be sure that I'm not going to get into any trouble. According to Turbotax, "Improvements" include:
- Heating and air conditioning systems or ductwork
Would I get into trouble expensing it as a safe harbor instead of depreciating the asset over 27.5 years?
I should note that this rental unit is an investment, not a business.
