I purchased a new refrigerator and washer/dryer for my rental property. How do I deduct the expense? I didn't see an option to include new purchases just repairs.

[Hal_Al]

The 250 hour rule governs whether you can claim your rental as a "business" for purposes of claiming the new (staring in 2018) QBI (Qualified Business Income) deduction.  

There is no 250 hour rule for being able to deduct a new asset, under  $2500, as an expense.  You may deduct the the cost of a new refrigerator as an expense.  

[Carl]

I would have to first qualify to the safe harbor by dedicating 250h/y of being directly involved.

That has nothing to do with this. If the cost is less than $2,500 you can expense it. Generally, this can not be applied to that which becomes a permanent and material part of the structure. An appliance such as fridge, washer and dryer do not become such.

[yupod]

Thanks! super helpful. To reconfirm, I would still need to do an explicit election for the "Safe Harbor for Routine Maintenance" in TT?

[ThomasM125]

@yupod  

Yes, you do need to make the Section 1.263(a)-1(f) election for de minimis safe harbor each year you choose to expense assets that cost under $2,500. TurboTax will ask you if you want to take the election when you enter your assets and if so, will include the election notice with your tax return.

[Vlad032]

Off the subject: Tenants should not dictate or get involved into your business (taxes, etc).

I hope you got a better ones. 

[Labby1]

Is the expense option a total amount or the amount per appliance?  In 2021 I had the kitchen remodeled in my rental; the total for appliances was $3100 but no appliance was over $800 each.  

[Hal_Al]

The expense option is the amount per appliance.

[Carl]

It is my understanding that for a "plain vanilla" rental property one is unlikely to qualify as a business and therefore would not be able to claim de minimis election. That is because one is unlikely to spend 250hrs/y actively managing single-family rental where tenants tend to stay 1y+.

YOu are confusing the safe harbor di minimis deduction, with the requirements for the QBI deduction. To take the QBI deduction, the 250 hours "directly involved" rule applies. It does not apply to the safe harbor deduction.

[wleuter]

Hi @Carl 

I saw your post like below and I just want to know does it still work for TurboTax 2023? Thank you!

For rental property assets, they are normally capitalized and depreciated over time. Appliances would be depreciated over 5 years. However, for qualifying assets that cost less than $5000 you have the choice to either capitalize and depreciate, or to just deduct the full cost as an expense in the year of purchase. Appliances that cost less than $5000 qualify to be expensed.

When working through the rental expenses section, the very, very, very *VERY* last screen of that section is for miscellaneous expenses not covered in other expense categories. Just enter your appliances there and the cost, click Continue and press on.

Overall, depreciating the appliances over 5 years will have minimal affect on your tax liability (if any at all due to every increasing carry forward losses) so I suggest you just expense them. That way, the expense is carried forward and unlike depreciation does not have to be recaptured when you sell the property in the future.

[Carl]

@wleuter being that TTX 2023 is not out yet, and being that congress has yet to finalize tax law changes for 2023, it's not possible to provide a definitive answer. However, being that it's been that way for about 10 years now (give or take) I don't see it being changed for 2023. But keep in mind I can't read the minds of those in congress. So your guess is as good as mine.

[tagteam]

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@wleuter wrote:

Hi @Carl 

I saw your post like below and I just want to know does it still work for TurboTax 2023? Thank you!

---

The amount for virtually every individual is $2,500, not $5,000. The $5,000 figure applies if you have some sort of a certified audited financial statement (for example, a statement required to filed with the SEC).

Also, the statement about recapture with respect to assets that are expensed is wrong. Expensed assets, in this context, have a basis of $0 and, when sold, are "recaptured" as ordinary income and taxed as such. 

[brucefal]

wleuter,

I saw your post and have a follow-up question.  For my rental, about 10 years ago we bought a refrigerator for $700 and depreciated it with the Special Depreciation Allowance and 200DB/HY 5 yr convention.  It is fully depreciated now.  We have not replaced it yet, but can I retire it from the Balance Sheet now, as it is fully depreciated?  Or do I have to wait until it is carted off to the landfill to retire it?

Thank you in advance for your response!

[Carl]

We have not replaced it yet, but can I retire it from the Balance Sheet now, as it is fully depreciated? Or do I have to wait until it is carted off to the landfill to retire it?

If the asset (refrigerator) is still "in use", then you really should leave it in the assets section. As an example, lets say you sell that old fridge, or if you take it to the metal recycler and they give you say, $10 for it. Since it was already fully depreciated, any amount you sell it for (even $10) is reportable/taxable income. You'd report the sale of that asset in the same assets/depreciation section where it's listed.

If you end up carting it off to the landfill, then you still need to "show" it's disposition on the SCH E in the assets/depreciation section. You just indicate that you stopped using the asset in whatever tax year. Then when asked if "special handling" is required, you select YES. It's disposition as a non-taxable transaction will then be "indicated" (for lack of a better term) on the tax return. Then, if it's imported the next tax year, you get delete it from the assets section then.

Otherwise, if an asset just "disappears" from your return, it "could "have the potential to raise eyebrows. Now I've never seen that happen. But just because I've never seen it, doesn't mean it hasn't happened, or can't happen. Though in my opinion, I think it would be extremely rare.

[brucefal]

Carl,

Thanks for the prompt response.  I appreciate it.  They don't cover the "retirement" question much in the publications, just the "recapture".  I'd like it if they add it to Pub 527..."If you cart the appliance or house to the landfill, it is considered a retirement and zero it out on the balance sheet, suckers!"  This is from a friendlier government... 

[Carl]

Weather you retire an asset, remove it for personal use, sell it, burn it, blow it up, haul it to the landfill, whatever, the correct procedure is to show it's disposition on the tax return. The year you show the disposition of the asset, will be the last year you need to show it on a tax return.

That's why I stated that if it does get imported into the next year's taxes after dispostion, you can just delete it from that next year's tax return. For a disposed asset, the program is not supposed to import it the next year. But sometimes it does so anyway.