Can I depreciate assets purchased before converting home to a rental?

[oneacross]

In 2020 I bought a home for personal use and purchased kitchen assets (like silverware, pots, pans).

In 2022 I converted the home into a rental property. These kitchen items are now used in the rental.

Can I depreciate these kitchen assets? If so, over 7 years?

Thanks

[Mike9241 · Accepted solution]

yes you can depreciate them. however, your depreciable basis is the lower of cost or Fair Market Vvalue when you started the rental. by the way the same rule applies to the building. 

[Carl]

assets (like silverware, pots, pans).

You don't depreciate such low cost items as that. You expense them based on the lower of a) what you paid for the item, or b) the FMV at the time placed in service. Whichever is lower. For kitchenware, I honestly would not wate my time with either.
Depreciating something like a $25 frying pan over 5-7 years is not going to make any impact what-so-ever on your tax liability.If you depreciate it, then you just create a paperwork nightmare of having to deal with the loss, damage and disposition in the future.

[oneacross]

You can expense an item placed into service in 2022, even though it was purchased in 2020? That sounds great!

Which IRS publication says this?

thanks! @Carl 

[tagteam · Accepted solution]

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@oneacross wrote:

You can expense an item placed into service in 2022, even though it was purchased in 2020? That sounds great!

Which IRS publication says this?

thanks! @Carl

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No IRS publication says that.

See https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations#Ad...

You expense property in the tax year during which you paid for that property.

[oneacross]

@tagteam  you’re saying I cannot expense items purchased in 2020, and converted to a rental in 2022?

I must depreciate even small items likes pots and pans?

[tagteam]

No. The general rule for those small items (less than $200) is that they can be expensed.

[delvalle]

Do you mean if the cost is less than $200, it can be expensed even before the in service date (e.g. If I bought and installed it in Mar. and rent the house out in May)? 

[tagteam]

No, you deduct the cost of those assets as expenses in the year they are purchased.

[delvalle]

Sorry, I didn't describe it clearly. My question was: if I converted house from primary to rental on May, but I had a cost of less than $200 for some items in March, there are also some other items that cost more than $200. Would I be able to expense the items that are less than $200?  

[tagteam]

Not really, and the proper cost recovery allowance (expensing or capitalizing) would be the lesser of your cost or fair market value on the date of conversion.

With respect to, comparably inexpensive, items initially purchased for personal use, such as kitchenware, small appliances, and the like, the fair market value is almost certainly going to be far less than the original cost.