You're confusing that with safe harbor. The safe harbor act says that some (I reiterate *some*) types of things that would qualify as property improvements, can be expensed if they cost less than $2500. For the most part, if it meets the first requirement above, it's a good bet it doesn't qualify for safe harbor. For example, appliances replaced in a rental are considered rental assets. But if that appliance is less than $2500 and does not become "a material part of" the property, then you have the choice to capitalize it, or expense it. That would be something like a new refrigerator.
But lets take a new under the counter built-in dishwasher. Depending on how you look at it, that could go both ways. Technically, since it's an under the counter model, it becomes "a material part of" the property. but hey, what if before I sell the property I remove the dishwasher and turn that space into a cabinet? See the ambiguity there?
For me, technically, since a dishwasher cost less than $400 now-a-days, it's not worth capitalizing over 5 or 7 years, and I'd just expense it. Capitalizing $400 over 5 years just isn't going to have any appreciable affect on my tax liability. So it's not worth it to me to capitalize it.
But lets say I am renting an empty room and when the renter moves out, I decide to furnish the room for the next tenant. I can do that easily for under $2500. I'd have the choice in that scenario to capitalize or expense the furniture. I'd choose to expense it myself. But that's me.
