If I take the De Minimis Safe Harbor deduction for rental property, can I still capitalize improvements to my own residence?

[small_taxpayer]

I own rental property for which I use the De Minimis Safe Harbor rule to count small assets (appliances, furniture, etc., below $2,500 each) as expenses in the year I buy them. As I understand it, this rule requires that I have a policy of treating costs like this as expenses rather than improvements.

Separate to this, I have been making a series of small improvements, each below $2,500, to my own residence (not the rental property). I plan to eventually include these costs in the calculation of the cost basis of my home when I sell it. However, the De Minimis Safe Harbor rule seems to say that I should have a policy that regards these as expenses rather than improvements.

So my question is, if I am using the De Minimis Safe Harbor rule for small improvements to my rental property, does that mean I also have to treat small improvements in my own residence as expenses, so I can't add them to my basis when I sell my residence?

Thanks for any help you can give!

[M-MTax · Accepted solution]

The safe harbor doesn't apply to personal use property so you have to capitalize.

https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations#Do...

[small_taxpayer]

Thanks for your help with this. Do you have any idea what my options are if the improvement is for a property that is partly my own residence and partly rented out? e.g., if I put in a new lawn that is shared between my household and a tenant. Can I allocate it between my personal use and the rental property (e.g., percentage based on square feet of the house rented out), then apply the de minimis deduction for the rental portion, and capitalize the personal-use portion?

[Carl]

if I put in a new lawn that is shared between my household and a tenant.

A "new lawn" (however you define just *exactly* what that is) is a property improvement. While land improvements do add to the cost basis, land is not a depreciated asset. Some "land improvements" are depreciated. But a "new lawn" doesn't sound to me like it is. If all you did was put down new sod, then while it can add to the cost basis, it's not depreciated and will have absolutely no impact on the depreciation you are required to take on rental property.

new lawn that is shared between my household and a tenant.

Sometimes, though not always, f you are renting out a physically separate structure on your property (such as an ADU) then the property improvement is either on the land specifically allocated to the tenant or land specifically allocated for personal use to you. But regardless of weather that applies to your specific and explicit situation or not, it's not going to make any difference to the depreciation you are allowed/required to take.

[M-MTax · Accepted solution]

then apply the de minimis deduction for the rental portion........?

No because the De Minimis Safe Harbor Election does not apply. 

https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations#Ad...