You treat the entire project as a capital improvement. The cabinets and shipping would all be part of the cost of the new cabinets as well as any labor paid for installation. Keep in mind that your labor is valuable but not to the IRS. Only fees paid to a contractor for installation would be included.
- This is considered as a capital improvement so you would add it as an asset. You can label it New Kitchen or as you see fit to recognize it later when the rental property is sold. This would be depreciated as residential real estate with a 27.5 year recover.
You have another option if this expense qualifies. It's called the Safe Harbor Election for Small Taxpayer (click the link for more information and steps to entry)
- Rules for this method for capital improvements:
- Your gross receipts, including all your other income, are $10,000,000 or less.
- Your eligible building has an unadjusted basis of $1,000,000 or less.
- The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits:
- 2% of the unadjusted basis of your building or
- $10,000
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