If I replaced windows in a rental property, can I only report the amount required to offset revenue and use the rest in a future tax year?

[IsabellaG · Accepted solution]

Not exactly.

You normally would depreciate the windows as a capital improvement to your rental property, and claim depreciation over 27.5 years. Windows are considered to be part of the structure of the building itself.

There is, however, an election available to expense these improvements. It's called the Safe Harbor Election for Small Taxpayers.

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

You would make the election in the Assets/Depreciation section of Rental Expenses.

If you take the election, you would claim the cost of the windows in the Other Expenses section of your rental property.

But you can't just use the cost of the windows to bring your income to zero, then carry over the expense to another year. You need to either depreciate them or expense them, if you qualify.

[Dm0616]

This is very helpful, thank you @IsabellaG . My rental property has HOA fees, pool cleaning, landscaping costs every month. Per year, I pay 5000 for this, which I claim every year. 

I am looking to change windows and this will run me 10,000. Since my total expenses for the property = 15,000, would I qualify for the safe harbor deduction ? I am also considering painting and gutter repairs which would run another 5000-10000. What’s the best way to take these deductions ?