The unit was built in the early 1980s and the bathtub is original. I bought the unit a few years ago and the bathtub was fine for a few years. Last year it got a small crack and started leaking. I tried to do an epoxy repair on it, which lasted a few month and then it started leaking again. This year I went ahead and replaced it for about $6K. How do I claim it? Obviously I would want to calim it as a Repair if I can.
I asked Google Gemini, and it was convinced that I could claim it as a Repair, as I was fixing a broken fixture which is required to be functional (it is the landlord's responsibility in NC).
I asked Microsoft Copilot, and it was sure it was an Imprevement, depreciable over 27.5 years.
Which one is it?
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A capital improvement that is attached to the structure is depreciated like the original house. You do have an option for the Safe Harbor Election for Small Business (includes rentals).
Here are the rules you need to meet to take this election:
If you find you do qualify for this option and you want to take the full expense in one year for the bathtub, use the steps below to enter it in your return.
A capital improvement that is attached to the structure is depreciated like the original house. You do have an option for the Safe Harbor Election for Small Business (includes rentals).
Here are the rules you need to meet to take this election:
If you find you do qualify for this option and you want to take the full expense in one year for the bathtub, use the steps below to enter it in your return.
Unfortunately the rental property was purchased for considerable less than 300K, so the expense is significanlty higher then 2% of the unadjusted cost basis.
So it looks like I will need to depreciate it as an improvement after all.
Thank you for the quick reply.
was the new one a substantial upgrade to the old one? Then it's definitely a capital expensiture. read no further.
the safe harbotr means that if you meet the tests, the iRS can not challenge the expensing of the item. just becuse an item does not meet the SH rules does not men it is not a repair
see this aruicle
https://www.thetaxadviser.com/issues/2021/oct/capitalized-improvements-vs-deductible-repairs.html
read example 2 for roof repairs. The final decision on capitalizing or expensing must be yours.
The replaced bathtub is just a new replacement for the old cracked one. It is not a significant upgrade in looks or functionality, it is just functional compared to the replaced one that was now 40 years old.
It does not qualify for the SH as it does not meet the below 2% of unadjusted cost Basis; but can it be seen as a just a Repair then, as it is just a small part of the plumbing system UOP?
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