Sump Pump Replacement at Rental Property

[DJ206]

I have a sump in the basement of my rental property where all of the plumbing in the house drains to and is then pumped up a hill into the city sewer. This sewage sump pump died this year and I replaced it with a similar model. Since I did not upgrade the system would this still be considered an improvement that needs to be depreciated or would this be a repair which could be expensed?

The life expectancy of the new pump is 5-10 years according to the plumber who installed it and the previous pump lasted 7 years. Since this is a replacement part with anticipated life of 10 years or less would it qualify for the Routine Maintenance Safe Harbor?

The plumber charged ~$5,000 to remove the old pump and install the new one. My cost basis in the house (~$220,000) is insufficient to cover the expense using the Small Taxpayer Safe Harbor even if that was an option. 

Thank you!

[RobertB4444]

It is an asset and should be depreciated as such.  The pump is a rental fixture and has a life of 8 years.  You may also qualify for bonus depreciation this year if you have enough income to offset it.  

@DJ206 

[DJ206]

Hi Robert,

I really appreciate the reply @RobertB4444!

I understand that a new piece of equipment would normally be capitalized, but in reading the Tangible property regulations – Frequently asked questions (www.irs.gov/businesses/small-businesses-self-employed/tangible-prop[product key removed]ations) it sounds like even if something would normally be capitalized as an improvement you can instead deduct it as an expense if it meets the four listed requirements for the Safe Harbor for Routine Maintenance. It seems like this specific repair, given that the pump has a relatively short life expectancy, meets those four requirements.

1. It is an amount paid for a recurring activity (periodic repair/replacement of the pump)
2. It is a result of my tenants use of the rental property,
3. It is necessary to keep the property in ordinary efficient operating condition,
4. It is something I anticipated doing more often than every 10 years.

Just out of curiosity, is there some competing regulation or something in this IRS publication I am missing which causes this to not qualify for the Routine Maintenance Safe Harbor? I have pasted the full section I am referencing from the Tangible Property Final Regulation below:  

Safe harbor for routine maintenance

You are not required to capitalize as an improvement, and therefore may deduct, amounts that meet all of the following criteria:

• Amounts paid for recurring activities that you expect to perform;
• As a result of your use of the property in your trade or business;
• To keep the property in its ordinarily efficient operating condition; and
• You reasonably expect, at the time the property is placed in service, to perform the activities:
  • For building structures and building systems, more than once during the 10-year period beginning when placed in service, or
  • For property other than buildings, more than once during the class life of the unit of property.

If the amount doesn't meet all of the requirements for the routine maintenance safe harbor, you may still deduct the amount if the amount is not for an improvement under the facts and circumstances analysis.