@Anonymous_ wrote:
@Opus 17 wrote:
You just have a slight loss on the unfavorable treatment of the hot water heater. (You probably lost about $200 by depreciating it instead of expensing it. Not the worst mistake you could have made.)
That is not a mistake at all at this point. Had the water heater been expensed, the entire amount would now be subject to recapture at ordinary income tax rates upon the sale. The treatment chosen by @michash2998 will result in less recapture if the sales price is allocated accordingly.
Isn't the whole point of the safe harbor expense that the item is not an asset but an expense and doesn't have to be recaptured? We're not talking about section 179 or some other kind of bonus or accelerated depreciation. See for example here.
https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/are-rental-property-s...
(And lastly note that the safe harbor for small businesses including rental improvements that applies here is a different safe harbor than the $2500 one I was thinking of. The limit is potentially higher, for one thing. Doesn't change my answer though.) https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations#Sa...
