WATER HEATER REPLACEMENT

[nola4]

I replaced a water heater with a new one in a residential rental property

date old water heater put in service 2019

date new water heater put in service 2024

the old water heater i depreciated it for 27.5 years

QUESTION: I have not finished depreciating the old water heater since i took it out of service after 5 years

                       How do I claim the portion i didnt depreciate in 2024?

[AmeliesUncle]

Go through that "asset" and indicate it was disposed.  I don't remember the exact options, but it will give you an option to say it is permanently no longer being used, or else you can say you "sold" it for $0.  The end result is that it will give you the rest of the undepreciated amount this year.

[nola4]

Thank you for your reply, i did what you told me and the rest of depreciation carried to form 4797 part 1, shouldn't it have carried it to part 2?

[AmeliesUncle]

Yes, you are right.  An "abandonment" should go on Part 2.

If the program lets you choose that it was "abandoned" and it were to put it on Part 2, that is ideal.  However, the last I checked, the program did not do that.  It may give an "abandoned" option though, so you should check if that is there and how it treats it.

In most cases, you will end up the with same tax result if it is put in Part 1.  But you are right, there are some circumstances that it can change the effects so it should ideally be in Part 2.  But as I said, unfortunately, the last I checked the program did not do it correctly (but perhaps that has changed).