Safe harbor rules for part of roof underlayment cost of $20k? Is this per rental house as have multiple. Also, where is this entered on turbo Tax, I use forms on program .

[MikeP3]

Safe harbor rules for part of roof underlayment cost of $20k? Is this per rental house as have multiple. Also, where is this entered on turbo Tax, I use forms on program .

[MarilynG1]

TurboTax allows landlords to use the De Minimis Safe Harbor election to immediately expense rental asset purchases costing $2500 or less per item, rather than depreciating them over several years. 

If you spent a total of 20K for roof underlayment on several rentals, you could allocate a % to each rental, if you don't have a breakdown per property, or enter the total as a depreciable asset for one property. 

From the Asset Summary, 'Add an Asset.' If you choose 'Rental Real Estate Property' (most appropriate), you'll depreciate the total over 27.5 years.  If you choose 'Tools, Machinery, Equipment, Furniture' you'll have a choice of several depreciation/deduction options, but since this is technically an improvement to the property, it's really not an appropriate category. 

If you have enough properties to split the expense to $2500 each, you'll be asked about the 'Safe Harbor' election when you say Yes" to "Did you buy any items that each cost $2,500 or less?"

Here's more info on Rental Property Improvements.

@MikeP3 

[MikeP3]

Only the underlayment was replaced. The tiles and plywood were not replaced. Does one think of this as a system like plumbing or electrical of the house thus is not capitalized under (I) Residential Rental Real Estate (27.5yrs) but under (F) Rental Carpet, etc (5yrs). I think the limit of $10k or 2% of house unadjusted value means you add all Repairs and Maintenance on Sch E and they cannot be more than the limit even if truly repairs and maintenance items. Correct?

[AmyC]

Safe Harbor Limit:

The total amount paid for repairs, maintenance, and improvements during the year must not exceed the lesser of:

2% of the building’s unadjusted basis, OR

$10,000.

The "All-In" Rule: You are correct that this limit is cumulative. You must add up all repairs and maintenance items on your Schedule E for that specific house. If the total exceeds the limit, the entire amount for that project usually must be capitalized, unless you can prove the underlayment is a "repair" rather than an "improvement."

Repair or improvement:

The IRS looks at Betterment, Restoration, and Adaptation to determine if improvement.

Restoration is replacing a major component and must be capitalized. While reusing the tiles is great, the underlayment on the roof is considered a restoration of the primary water barrier. As such, it is categorized as residential real estate and depreciated over 27.5 years unless it qualifies for the safe harbor election.

Reference: IRS Pub 527, particularly page 7.