The replacement of a water heater would be a depreciable asset but you can choose to expense it. Since it is only $885, depreciating it would result in a very very small benefit.
You would enter the water heater cost in the Home Office section under Repair Expenses
To do this click the following
- Business
- I'll Choose what I work on
- Update next to Business Income and Expenses
- Edit next to your business
- Start next to Home Office Expense under Business Expenses
- Walk through all the questions until you come to the Repair Expense question.
- You may not see this question if you are choosing the simplified method. You will see it if you are taking the actual expense method.
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