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Paul921921
Returning Member

How does the $2500 limit on De Minimis Safe Harbor Elections for rental property assets apply if I own less than 100% of the property?

I own a 40% share of a single family rental property.  In 2016, a new fence was installed for $4500.  Instead of depreciating the fence, can I allocate my cost of the fence (40% of $4500 = $1800) and claim $1800 as an expense on my personal return using the De Minimis Safe Harbor Election?

1 Best answer

Accepted Solutions
PatriciaV
Expert Alumni

How does the $2500 limit on De Minimis Safe Harbor Elections for rental property assets apply if I own less than 100% of the property?

Yes, as long as you qualify for the Safe Harbor Election, you may include this expense on your tax return:

The requirements of the safe harbor election for small taxpayers are:

  • Average annual gross receipts less than $10 million; and
  • Owns or leases building property with an unadjusted basis of less than $1 million; and
  • The total amount paid during the taxable year for repairs, maintenance, improvements, or similar activities performed on such building property doesn't exceed the lesser of-
    • Two percent of the unadjusted basis of the eligible building property; or
    • $10,000; and
  • You make the election to use the safe harbor for each taxable year in which qualifying amounts are incurred.
Use your percentage ownership of the property and asset to determine if you qualify.

For directions on how to access this in TurboTax, please see "Where do I input depreciation?"


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3 Replies
PatriciaV
Expert Alumni

How does the $2500 limit on De Minimis Safe Harbor Elections for rental property assets apply if I own less than 100% of the property?

Yes, as long as you qualify for the Safe Harbor Election, you may include this expense on your tax return:

The requirements of the safe harbor election for small taxpayers are:

  • Average annual gross receipts less than $10 million; and
  • Owns or leases building property with an unadjusted basis of less than $1 million; and
  • The total amount paid during the taxable year for repairs, maintenance, improvements, or similar activities performed on such building property doesn't exceed the lesser of-
    • Two percent of the unadjusted basis of the eligible building property; or
    • $10,000; and
  • You make the election to use the safe harbor for each taxable year in which qualifying amounts are incurred.
Use your percentage ownership of the property and asset to determine if you qualify.

For directions on how to access this in TurboTax, please see "Where do I input depreciation?"


eronrox
Level 3

How does the $2500 limit on De Minimis Safe Harbor Elections for rental property assets apply if I own less than 100% of the property?

I have the same question as the OP, but unfortunatley the "best answer" that was given was with reference to the Small Harbor for Taxpayers which is an altogether different provision. That safe harbor is concerned with the total of all expenses, not individual expense items.

 

As per the OP, I'm interested specifically in how to apply the $2500 De Minimis Safe Harbor (not the Small Tax Payer, nor the Routine Maintenance Safe Harbors) when there is partial ownership and thus a corresponding percentage share of the expense.

 

The dollar limit under the De Minimis provision is stated to apply "per invoice" or "per item as substantiated by the invoice". I'm not certain if this implies that the original invoice amount cannot exceed $2500 period (i.e. so if you own 50% then tough luck, you only get $1250 for the safe harbor), or whether that can be interpreted in relation to your share of the invoice (i.e. original invoice could have been $5000, but as your share would be $2500 you are fine to apply the safe harbor).

 

Thank you

eronrox
Level 3

How does the $2500 limit on De Minimis Safe Harbor Elections for rental property assets apply if I own less than 100% of the property?

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