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steve-2010
New Member

I spent $542 to upgrade a home security system in a rental apartment. Can I deduct the total amount or would the expense be considered a capital improvement?

Since the amount is less than $2500, can the cost be fully deducted in this tax year or would the upgrade be considered a capital improvement to the rental apartment.

1 Best answer

Accepted Solutions
Coleen3
Intuit Alumni

I spent $542 to upgrade a home security system in a rental apartment. Can I deduct the total amount or would the expense be considered a capital improvement?

Yes, you can deduct this amount, if it is a system you can take with you. If it is a part of the buiding, you can still choose to expense it under the provisions that follow.

De Minimis Safe Harbor Election
 

This election for items $2,500 or less is called the De Minimis Safe Harbor Election. This election is an option you can take each year that lets you write off items $2,500 or less as expenses instead of assets. Expenses typically reduce your income by a larger amount than depreciating an asset over multiple years does. This means you could get a bigger refund.

If you decide to take this option, a form called De Minimis Safe Harbor Election will show up in your tax return. This election will apply to all your businesses, rental properties or farms.

Here are the rules you need to meet to take this election:

  • You don't have an applicable financial statement (most people don't).
  • You have a consistent process for how you record expenses and assets.
  • You record these items as expenses on your books/records.
  • The cost of each item as shown on your receipt is $2,500 or less.

Improvements Election

This election is an option you can take each year that lets you write off some building improvements as expenses instead of assets. 

Here are the rules you need to meet to take this election:
 

  • 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

This election for building improvements is called the Safe Harbor Election for Small Taxpayers. If you decide to take this option, a form called Safe Harbor Election for Small Taxpayers will show up in your tax return. This election will apply to all your businesses, rental properties or farms.


View solution in original post

6 Replies
Coleen3
Intuit Alumni

I spent $542 to upgrade a home security system in a rental apartment. Can I deduct the total amount or would the expense be considered a capital improvement?

Yes, you can deduct this amount, if it is a system you can take with you. If it is a part of the buiding, you can still choose to expense it under the provisions that follow.

De Minimis Safe Harbor Election
 

This election for items $2,500 or less is called the De Minimis Safe Harbor Election. This election is an option you can take each year that lets you write off items $2,500 or less as expenses instead of assets. Expenses typically reduce your income by a larger amount than depreciating an asset over multiple years does. This means you could get a bigger refund.

If you decide to take this option, a form called De Minimis Safe Harbor Election will show up in your tax return. This election will apply to all your businesses, rental properties or farms.

Here are the rules you need to meet to take this election:

  • You don't have an applicable financial statement (most people don't).
  • You have a consistent process for how you record expenses and assets.
  • You record these items as expenses on your books/records.
  • The cost of each item as shown on your receipt is $2,500 or less.

Improvements Election

This election is an option you can take each year that lets you write off some building improvements as expenses instead of assets. 

Here are the rules you need to meet to take this election:
 

  • 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

This election for building improvements is called the Safe Harbor Election for Small Taxpayers. If you decide to take this option, a form called Safe Harbor Election for Small Taxpayers will show up in your tax return. This election will apply to all your businesses, rental properties or farms.


View solution in original post

steve-2010
New Member

I spent $542 to upgrade a home security system in a rental apartment. Can I deduct the total amount or would the expense be considered a capital improvement?

Would use of the De Minimis Safe Harbor Election for the security system upgrade be listed under expenses as a miscellaneous expense?
Coleen3
Intuit Alumni

I spent $542 to upgrade a home security system in a rental apartment. Can I deduct the total amount or would the expense be considered a capital improvement?

Miscellaneous. Any item that doesn't have a specific category such as mortgage, repairs, etc, will be entered in miscellaneous as a catch all.
steve-2010
New Member

I spent $542 to upgrade a home security system in a rental apartment. Can I deduct the total amount or would the expense be considered a capital improvement?

Would the De Minimis Safe Harbor Election also apply to the replacement of appliances such as a water heater?
Coleen3
Intuit Alumni

I spent $542 to upgrade a home security system in a rental apartment. Can I deduct the total amount or would the expense be considered a capital improvement?

Yes.
steve-2010
New Member

I spent $542 to upgrade a home security system in a rental apartment. Can I deduct the total amount or would the expense be considered a capital improvement?

Thank you for your informative responses to my questions.
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