You do have an option of using the Safe Harbor election if you qualify. This expense is a capital improvement which makes the decision and the calculation a bit more complicated.
Using the deduction under the De Minimis Safe Harbor Election is definitely the best option. It's a good idea to use what you are entitled to now and let next year take care of itself. The information below should help you figure out if you qualify.
One of the areas of confusion is that you cannot use the fair market value (what it's worth), you must use the adjusted basis to use against the 2% shown below. The adjusted basis is your cost less any depreciation expense that has been used.
- Example: Your cost was $110,000 and the accumulated depreciation is $10,000
- $100,000 x 2% = $2000
- Because the amount calculated is smaller than the total expense you must depreciate all of the cost and are not entitled to the Safe Harbor election.
- If this is how your calculation turns out you must depreciate the roof using residential rental as the property type.
- If the calculated amount is at least $5301 I would advise to take the deduction under this provision.
- Note: if the deduction is allowed then you enter that as a miscellaneous expense on your rental activity and not as an asset. If you are entering the asset and then choosing the safe harbor the depreciation will be zero for this reason.
Keep all receipts and documentation with your tax records for future audit purposes. Here is a TurboTax article with more information.
[Edited: 03.09.2018 | 8:40 AM]
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