Tax Appliance Depreciation

[MCrys]

I turned a personal home into a rental (2024). Can I depreciate any of the appliances? All of them have been for personal use. The wash machine was purchased in fall 2021 in anticipation of keeping this house furnished for rental use.

[DianeW777]

Yes, you can depreciate the appliances.  Two things to keep in mind:

1. Enter the date of purchase, and the date it was placed in service for rental use (you will be asked both questions).
2. The cost basis for depreciation will be the lesser of actual cost OR the fair market value (FMV) on the date placed in service.
   • The FMV will likely the the lower amount since it is a depreciable asset already used for personal purposes.
   • Where do I enter rental income and expenses?

The appliances will be assets and entered separately from the rental home itself. For the rental home, your cost for depreciation and tax purposes follow the same rules however most real estate increases in value so the cost would most likely be the amount for the house itself. This includes the original purchase price, capital improvements and any structural component.  See the definition below.

Land cost must be calculated separately and entered when asked.  The best resource would be to check your tax assessment records to arrive at the percentage of the cost that relates to the land. 

IRS definition of Structural components (for your review):

Parts that together form an entire structure, such as a building. The term includes those parts of a building such as walls, partitions, floors, and ceilings, as well as any permanent coverings such as paneling or tiling, windows and doors, and all components of a central air conditioning or heating system including motors, compressors, pipes, and ducts. It also includes plumbing fixtures such as sinks, bathtubs, electrical wiring and lighting fixtures, and other parts that form the structure.

[MCrys]

Does age of the appliance matter? I only have the receipts for the wash machine (3 years old) and dryer (8 years old). The stove and dishwasher are 15 years old.

[DianeW777]

Yes, in reference to determining the fair market value (FMV).  These are depreciable assets and therefore it is unlikely you could sell the for what you paid. Do the best you can to arrive at a FMV to use as your cost basis for these appliances. 

• FMV = what a willing buyer would pay a willing seller while neither has a need to buy or sell and in the current market place.
  • Check Goodwill or any thrift store for pricing if necessary

Once you make your informed decision, that will be the amount to use for depreciation.  Keep your records to show how you arrived at the FMV for each appliance.