What are the advantages of using safe harbor to qu...
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mpnuval
New Member

What are the advantages of using safe harbor to qualify my rental property for a deduction?

 
2 Replies
jpthomsin
New Member

What are the advantages of using safe harbor to qualify my rental property for a deduction?

Have the exact same question.

pattif12
Expert Alumni

What are the advantages of using safe harbor to qualify my rental property for a deduction?

Safe harbor allow you to deduct expenses that total less than $10,000 in the year that the occur instead of capitalizing certain items and spready the expenses over the depreciation life of an improvement.

 

Safe Harbor Election for Small Taxpayers

You are not required to capitalize as an improvement, and therefore may be permitted to deduct, the costs of work performed on owned or leased buildings, e.g., repairs, maintenance, improvements or similar costs, that fall into the safe harbor election for small taxpayers. The requirements of the safe harbor election for small taxpayers are:

  • Average annual gross receipts of $10 million or less; and
  • Owns or leases building property with an unadjusted basis of less than $1 million or less; and
  • The total amount paid during the taxable year for repairs, maintenance, improvements, or similar activities performed on such building property doesn't exceed the lesser of-
    • Two percent of the unadjusted basis of the eligible building property; or
    • $10,000 (for questions about how to calculate the unadjusted basis, refer to "Figuring the Unadjusted Basis of Your Property" in Publication 946
  • You make the election to use the safe harbor for each taxable year in which qualifying amounts are incurred.

And with the newly released section 199A, you are able to take the QBID and be eligible for the 20% deduction.

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