Had to install a new septic system at my rental house last year. Is this considered an expense that can be taken in one year or does it have to be depreciated?

The IRS considers a septic system to be a capital improvement rather than an expense.  So you'll depreciate it over 27.5 years rather than deducting it.

Here is a link to IRS Publication 527, Residential Rental Property, which discusses all aspects of this topic.  Note table 1-1 beginning on page 5.

https://www.irs.gov/pub/irs-pdf/p527.pdf