You may qualify to expense these windows entirely instead of depreciating them as "Improvements" which are depreciated over a 27.5 useful life. The election to expense them currently is called the Safe Harbor Election for Small Taxpayers.
This election is an option you can take each year that lets you write off some building improvements as expenses instead of assets. Expenses typically reduce your income by a larger amount than depreciating an asset over multiple years does. This means you could get a bigger refund.
Here are the rules you need to meet to take this election:
- Your gross receipts, including all your other income, are $10,000,000 or less.
- Your eligible building has an unadjusted basis of $1,000,000 or less.
- 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
If you decide to take this option, a form called Safe Harbor Election for Small Taxpayers will show up in your tax return. This election will apply to all your businesses, rental properties or farms. If you qualify for this election, then you'll enter the windows as "Other Expenses" on your Schedule E.
