Can I deduct appliances after I move out of my owner-occupied duplex?

[onew1n]

I just closed on a duplex.  For each unit of the I purchased a set of new refrigerator, microwave, washer, dryer. 

Unit 1: Rental since Day 1

Unit 2: Owner occupied for 12 month then convert to Rental

I understand as a landlord I am able to deduct all the appliances in Unit 1 (de minimis safe harbor, everything is <$2,500) .  For my own unit I am not allowed to deduct as it is personal use year 1.  But once I move out and rent Unit 2, may I take the deduction.  If so am I able to used de minimus safe harbor or will I have to depreciate the appliance along with the unit?

[Critter-3 · Accepted solution]

No it cannot be expensed ... you must depreciate the second unit and all the appliances contained in the unit since they were not bought and placed into service in the same tax year.  

[Opus 17 · Accepted solution]

For unit 2, you place the property in service when you convert it to a rental.  The basis for depreciation of the appliances is their cost, or the fair market value at the time of conversion, whichever is lower.  So realistically, maybe half their original cost?  You may have to do some research at used appliance stores.  You are not allowed a rental deduction for the depreciation that occurred while the unit was personal use.  Since it's not a new purchase it doesn't qualify for de minimis or section 179.  

[Carl]

Since the appliances were not placed in service as a rental asset in the same tax year they were purchased, your only option is to depreciate them. Understand this is an *option* and not a requirement.  If you elect to depreciate, then your depreciation basis will not be what you paid for those appliances most likely, since they are over 1 year old. Your cost basis for depreciation is the *lesser* of what you paid for them, or their FMV on the date they were placed in service.

Personally, I would not waste my time with depreciating appliances with a total cost of less than $2500-3000. Appliances are depreciated over 5 years and depreciating something such as a washer/dryer set over 5 years will most likely not make one penny of difference in your tax liability over those 5 years. If it does, you're talking maybe $2 a year at best. Then add to that when you have to replace the appliance (and you most likely will after 5 years) you now have the additional time and paperwork of disposing of the old and acounting for the new. So were I in your shoes, I'd just "blow it off" for that one particular unit.

It's not an issue in the other unit since you can expense them (and did) under safe harbot.