What category is electrical rewiring and drywall repairs for rental home? Can I take Section 179 or Special Depreciation Allowance?

[gordonhtfu]

I have done a knob and tube wiring removal for my rental home because knob and tube wiring is an obsolete wire coding standard and I wanted to take precaution of the potential fire hazards.  As a part of this rewiring project, there were 50 holes cut out from the drywall so I needed a drywall repair and paint job consequently.

I have a few related questions:

1) Should I club all the charges for the full rewiring projects together in the same entry or should I break it down (Electrical rewiring = 25K, drywall repair/painting = 7K)?

2) Which category is electrical rewiring, drywall repair/painting considered as?  Residential Rental Real Estate, Appliances or Land Improvements?

3) Can I take Section 179 or Special Depreciation Allowance to deduct these costs this year?

[JamesG1]

The project taken as a whole should be categorized as Residential Rental Real Estate, would be depreciated over 27 1/2 years and not be eligible as for Section 179 or the Special Depreciation Allowance.

Recommend that you review your improvements and see whether some expenditures can be isolated as current year expenses and not be capitalized and depreciated over the 27 1/2 year period.

[Carl]

Generally, a property improvement includes all costs incurred directly or indirectly related to that property improvement. That would include the cost of labor, materials, shipping, etc. Basically *ANYTHING* even remotely tied to the improvement. So that would include the cost of cutting holes in the walls and repairing those holes.

Technically, your cost of repairing the holes in the walls are not classified as a repair, because those holes were not created for no reason at all or by accident. They were created for the explicit and specific purpose of re-wiring the house. Therefore you didn't "repair" anything really. It was a cost incurred as "a part of" the property improvement. So it's included as "a part of" the property improvement.

Your total cost for this project gets entered in the assets/depreciation section, classified as residential rental real estate and depreciated over 27.5 years. This project is "NOT" eligible for SEC179 deduction or the 50% special depreciation allowance.

TurboTax will ask you the question, because the program has no possible way of knowing what property improvements are or are not eligible. But this project is not because without question, this improvement did become "a physical part of" the structure itself.

[gordonhtfu]

Thanks Carl and James. Your answer is very clear.