I rented my second house starting 9/1/2016. When I filed my 2016 returns, I showed various assets (the house itself, fence, stove, and dishwasher) and claimed depreciation in 2016 for them. On 11/29/2017, I replaced the water heater which cost $1,349. I have the following questions pertaining to my 2017 returns:
1. Do I have to show the heater as an asset with a life of 27.5 years or can I show it as an expense? TurboTax states that I can do so if I have a consistent process for how I record expenses and assets and the cost is less than $2,500. Does the fact that last year I claimed depreciation on appliances rather than showed them as expenses prevent me from claiming the heater as expense this year?
2. Do I continue to claim depreciation on assets (other than heater) this year or is there any way I can expense/remove them this year? It's a headache to continue to show the fence in tax returns for 15 years or appliances for 5 years.
Thanks a lot for your help.
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1. Generally, if the useful life is over one year, you are required to depreciate. You can, however, elect the De Minimus Safe Harbor for Business Assets Under $2500. In this way, you can expense them. The fact that you depreciated the prior appliances does not prevent you from expensing them this year. You can do this each year - expense some assets that are below $2500 and depreciating the ones that exceed $2500.
2. The only way to change the way you depreciated the prior assets is to amend the 2016 return. This would have you paying back the depreciation amounts. I'm not sure that is would not be trading one headache for another. The depreciation for the fence/appliances will just keep rolling in the tax return until the remainder of their useful life. You shouldn't have to refigure the amounts each year. You will have to decide which way to go.
See TurboTaxColeen's answer below for reference.
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