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Level 2

Replace electrical panel == 27.5 year depreciable asset?

Is my assumption correct that my electrical panels that I replaced in each rental unit is depreciable as part of the real estate property itself (since these are integral to the property itself) at 27.5 years and cannot be expensed (or depreciated at a quicker timeline)? Each panel cost $625 to install.

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Accepted Solutions
Employee Tax Expert

Replace electrical panel == 27.5 year depreciable asset?

Actually, since it is an electric panel, even though the result is the same, the electric panel would qualify under the Safe Harbor Election for Small Taxpayers, not the De Minimis Election.

 

To do this in TurboTax, under Self-employment income & expenses, under the expenses section, select Assets and follow these steps:

  1. At Any Large Purchases (Depreciable Assets)? select Yes.
  2. At Did you buy any items for any business, rental property and/or farm that cost $2,500 or less in 2020? select Yes. (This concerns the De Minimis Election)
  3. At Let's see if you can deduct these items as expenses, answer the questions as listed and Continue.
  4. Answer the questions until you get to Did you make improvements to a building you used for this business in 2020? and select Yes and Continue.
  5. At Let's see if you can claim these improvements as expenses answer the questions and Continue. (This concerns the Safe Harbor Election)

Now, report the Electric Panel asset and its details.

  • At Describe the building you made improvements to enter your property address.
  • At Do you have any items for this business that aren't covered by your elections? Answer Yes and Continue.
  • At Describe This Asset, select Real Estate Property and enter the date purchased and Continue.
  • At Tell Us a Little More About Your Business Asset, select Qualified Improvement Property and Continue.
  • At Tell Us About This Asset / Large Purchase describe the qualified improvement property as Electric Panels, enter the Cost and Continue.
  • At Tell Us More About This Asset / Large Purchase, identify whether the panels were bought used or new, whether they are used 100% for the business, the date of purchase and Continue.
  • At How Do You Want to Deduct this Item? select your preference and Continue. This is where you can elect to take 100% of the expense as special bonus or as Section 179. If your business is reporting a profit, this will deduct 100% of the expense and the election will allow it.

 

View solution in original post

4 Replies
Employee Tax Expert

Replace electrical panel == 27.5 year depreciable asset?

No. A safe harbor de minimis election can be made allowing for expensing individual receipts less than $2,500.

 

To do this in TurboTax, when reporting your rental expenses, answer the prompts Yes that you had purchases individually for less than $2,500.

 

See this article for more information: De Minimis Safe Harbor Election

Level 2

Replace electrical panel == 27.5 year depreciable asset?

I appreciate your response. I did read up on that a bit but wasn't certain that included things that would otherwise be included as part of the real estate property itself. Is it that simple that it doesn't matter what the expense is for and under what depreciation schedule it would have otherwise normally fall under, as long as the receipt is under $2500...that's the basic criterion? 

Employee Tax Expert

Replace electrical panel == 27.5 year depreciable asset?

Actually, since it is an electric panel, even though the result is the same, the electric panel would qualify under the Safe Harbor Election for Small Taxpayers, not the De Minimis Election.

 

To do this in TurboTax, under Self-employment income & expenses, under the expenses section, select Assets and follow these steps:

  1. At Any Large Purchases (Depreciable Assets)? select Yes.
  2. At Did you buy any items for any business, rental property and/or farm that cost $2,500 or less in 2020? select Yes. (This concerns the De Minimis Election)
  3. At Let's see if you can deduct these items as expenses, answer the questions as listed and Continue.
  4. Answer the questions until you get to Did you make improvements to a building you used for this business in 2020? and select Yes and Continue.
  5. At Let's see if you can claim these improvements as expenses answer the questions and Continue. (This concerns the Safe Harbor Election)

Now, report the Electric Panel asset and its details.

  • At Describe the building you made improvements to enter your property address.
  • At Do you have any items for this business that aren't covered by your elections? Answer Yes and Continue.
  • At Describe This Asset, select Real Estate Property and enter the date purchased and Continue.
  • At Tell Us a Little More About Your Business Asset, select Qualified Improvement Property and Continue.
  • At Tell Us About This Asset / Large Purchase describe the qualified improvement property as Electric Panels, enter the Cost and Continue.
  • At Tell Us More About This Asset / Large Purchase, identify whether the panels were bought used or new, whether they are used 100% for the business, the date of purchase and Continue.
  • At How Do You Want to Deduct this Item? select your preference and Continue. This is where you can elect to take 100% of the expense as special bonus or as Section 179. If your business is reporting a profit, this will deduct 100% of the expense and the election will allow it.

 

View solution in original post

Level 2

Replace electrical panel == 27.5 year depreciable asset?

Kathryn, I wanted to finish this up this weekend and went back into TurboTax, but I'm a bit confused by your instructions. I already have Schedule E forms filled out for each rental unit, I did not do Self-Employment income, but rather the Rental income path. Your solution will force me to create new self-employment business units for each rental unit, correct? Is the cool to do even though I already have Schedule E forms filled out? How will the IRS rectify the different types of filings for the same business? Thanks again for your awesome replies.

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