Does De Minimis Safe Harbor deduction have any tax consequences when selling a rental property?

[Michael_NC]

Hello,

In 2021, I purchased a new refrigerator for my rental property. The cost of the refrigerator was $1400 so I used the De Minimis safe harbor deduction to deduct the full cost versus defining the refrigerator as depreciating personal property.

In 2022, I sold my rental property and am trying to determine what/if any tax implementation does this De Minimis safe harbor deduction have when the associated rental property was sold. The refrigerator did remain with the property and transferred to the new owners.

Since it was not a depreciating asset, there is no depreciation to recapture.

Thanks for any guidance

[PatriciaV · Accepted solution]

No, choosing to use the Safe Harbor election for a rental equipment purchase has no effect on the sale of the rental property. Because you reported this purchase as an expense, you have already taken a deduction against your rental income. The equipment you purchased is not carried as an asset for your rental property, so you don't have any cost basis to report with the sale. Any remaining value would be considered part of the rental property itself (the same as light or plumbing fixtures).

[Michael_NC]

Yes, I was still thinking of the refrigerator as an asset and not an expense that I had already deducted as you clearly explained.

Thank you for the guidance!