This would be entered as an asset. The IRS considers a septic system to be a capital improvement rather than an expense on a rental. So you'll depreciate it over 27.5 years rather than deducting it. Here's how:
- Rental properties & Royalties...update
- On the Summary page...edit your rental
- Assets & Depreciation...update
- Did you make improvements...YES
- Rental real estate... describe: skip the land cost
- Purchased it new...used 100% for business
Here is a link to IRS Publication 527, Residential Rental Property, which discusses all aspects of this topic. Note table 1-1 beginning on page 5.
https://www.irs.gov/pub/irs-pdf/p527.pdf
