I've always been of the opinion (and we all know what opinions are like) that when it comes to rental property, things that cost less than $2,500 that do not become "a physical part of" the property should be expensed. Now there are some things that you would "think" would fall into that category. But they do not.
For example, a new hot water heater. Typically you can't expense that. A hot water heater becomes a physical part of the plumbing system, which is already a physical part of the rental property itself. A hot water heater is not something that one would typically remove from a property prior to selling it. So regardless of the cost, a new hot water heater gets classified as residential rental real estate and depreciated over 27.5 years.
The same holds true if you have central air in the house and the outside compressor, inside fan blower, or both get replaced.Besides, it would be rare to place either of those units alone for less than $2,500 anyway. But if you did, it's still a rental asset that gets depreciated over 27.5 years.
Now a window A/C unit would be different. WHile it's possible to purhcase a Window A/C & heating unit for more than $2,500, I seriously doubt any landlord would spend that kind of money for a window unit on rental property. So a window unit under $2,500 can be expensed. It's perfectly reasonable to remove such a unit from the house prior to selling it. All you have to do after removing it, is close the window it was in.
There are also some portable dishwasher styles out there. I know back in "the day" we had one that you rolled up to the kitchen sink, pushed the rubber feed hose onto the water faucet, put the drain hose in the sink, turned on the hot water and then pressed start. Something like that could be expensed. But a built-in under-the-counter dishwasher is without question, a physical part of the property.
One thing with kitchen appliances though, is that in the IRS Pub those fall in a "grey area". I've seen them classified as appliances or *equipment" and depreciated over 5 years. In my view, that's not really wrong because it is "equipment" and it is used to generate income from the renter that uses it.
But classifying appliances as residential rental property and depreciating over 27.5 years is not wrong either. The IRS pubs really don't clarify kitchen appliances all that well. IN one section you're "allowed" to classify them as such and depreciate over 5 years. In another section you can classify as rental property and depreciate over 27.5 years. So I guess it just depends on what you happen to read first.
