It's a property improvement that would be classified as "residential rental real estate" and depreciated over 27.5 years.
Property Improvement.
Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.
To be classified as a property improvement, two criteria must be met:
1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.
2) The improvement must add "real" value to the property. In other words, when the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.
Basement water sealing is a capital improvement and must be be depreciated. Since it is part of the stucture, the depreciation schedule is 27.5 years.
There are two allowable options for deducting the cost outright:
1. If the cost was less than $2500, you make deduct it under De Minimis Safe Harbor election
2. Safe Harbor for Small Taxpayers (SHST). If the total amount paid during the taxable year for repairs, maintenance, improvements, or similar activities performed on the building doesn't exceed the lesser of-