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.

[Anonymous_]

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@Carl wrote:

Otherwise, if an asset just "disappears" from your return, it "could "have the potential to raise eyebrows. Now I've never seen that happen.

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In this case the refrigerator (the asset) would appear nowhere on an individual income tax return after it was fully depreciated or expensed. It is not listed property nor real property so it would only appear in the taxpayer's records (or as part of a balance sheet on a business return).

[Teymietush]

Hello @Carl 

I will like to follow up on your response hopefully it can help answer my question. I have a rental property that is fully furnished. It is rented out all together with the furnished items.

It is a new suite that was built last year and all the items in it (furnitures, beddings, small appliances, electronics) were newly purchased before the tenants moved in. How do I claim tax for it? Should it be under expenses? Also, the cost of each of the items are under 2,500cad.

Thank you.

[DianeW777]

It depends.  The rent and all expenses are entered as residential rental on Schedule E.

• How do I enter my rental income and expenses?

Items such as bedding, towels, sheets, as example is an expense, where as small appliances are likely depreciable assets. Furniture is a depreciable asset as well as the suite itself. Electronics is variable depending on exactly what that is.  It could be an expense or a depreciable asset.

When you say a 'new suite' this assumes you have built a section on your home or a separate unit altogether to rent out to a tenant.

• Depreciable assets are any thing that has more than a one year life. 
  • The suite would have selected as Residential Rental Property and will be depreciated over 27.5 years, no exceptions. This includes the cost of the suite from start to finish.
  • Appliances have a 5 year recovery and has a separate selection specifically for this when entering the assets.
  • Furniture has a 7 year recovery and has a separate selection specifically for this when entering assets. 

You mention the Safe Harbor election which will be described below as well as how to enter it.

De Minimis Safe Harbor Election

This election for items $2,500 or less is called the De Minimis Safe Harbor Election. This election is an option you can take each year that lets you write off/deduct items $2,500 or less as expenses instead of assets. Expenses typically reduce your income by a larger amount than depreciating an asset over multiple years does. This means you could get a bigger refund.

If you decide to take this option, a form called De Minimis Safe Harbor Election will show up in your tax return. 

Here are the rules you need to meet to take this election:

• You don't have an applicable financial statement (most people don't).
• You have a consistent process for how you record expenses and assets.
• You record these items as expenses on your books/records.
• The cost of each item as shown on your receipt is $2,500 or less.
• Rental Property select Edit > Other expenses > Other Miscellaneous Expenses
• Enter Description (Safe Harbor ...) and amount (not entered as assets under this election)

Note:  Because you are under the $2,500 threshold, you are not required to use Section 179.  You can list these expenses under Miscellaneous.  If the amount was over 2,500, then you would enter these as assets and then would be able to choose the Section 179 option.

• Maintain a complete record with your tax return should you need to verify these items at a later time.

@Teymietush

[Teymietush]

Thank you for your response @pearl12970 

• By new suite, I mean a 2 bedroom legal basement suite that hss its own separate entrance from the main house and used for rentals. I wanted to ask, could one claim the cost of constructing the suite when filing tax? If yes, under what will that fall?
• Also, I am considering using the safe harbor approach for the expenses. Will I typically find the form when filing out the expenses?

[DianeW777]

Yes, the suite will be the residential rental asset, depreciated over 27.5 years.  The cost will be the capital improvements to create the suite and a portion of the original cost of the entire home.

• Calculate the cost of your home minus the land portion.  Take the square feet of the suite and divide that by the total square feet of the home.  
• Add the original cost of the suite/basement portion of the home to the improvements made specifically to the suite.
• This will be the cost basis used to depreciate the suite. 

No, you will not find a form when you enter the expenses.  The expenses are simply entered as an expense instead of an asset, as explained above, and placed here for convenience. They will be entered as an expense with the description noted.  It's up to you to keep a list to track the expense later.

• Rental Property select Edit > Other expenses > Other Miscellaneous Expenses
• Enter Description (Safe Harbor ...) and amount (not entered as assets under this election)

@Teymietush 

[susitnavalley]

The IRS doesn't care.