When you expense a qualified item under safe harbor, it's not treated as an asset and therefore is not depreciated. Additionally, the cost of the item can not be added to the cost basis either.
Now a water heater falls in a somewhat grey area. As I see it, a water heater does not qualify for safe harbor or for SEC179 or SDA. Since a water heater becomes a physical part of the plumbing system, which itself is a physical part of the structure, it gets classified as residential rental real estate and depreciated over 27.5 years.
There are others who will disagree with my assessment/interpretation, and they most certainly can do so.
