Hi, tenant moved out and I made improvements such as tearing down dining room wall & closets, reframing and drywall. If each cost less than $2,500, can I expense them this year?
If I need to depreciate them, would it fall under "residential rental real estate" or "appliances, carpet, furniture"?
You can expense the costs provided each invoice is $2,500 or less (under the de minimis safe harbor).
If I expense it, then I would not list it as an "asset" to depreciate but instead it would fall under "miscellaneous" for expenses?
@jeannie1122 wrote:
If I expense it, then I would not list it as an "asset" to depreciate but instead it would fall under "miscellaneous" for expenses?
Yes, exactly right.
If you choose not to expense it, but to depreciate it instead, then it's classified as residential rental real estate and depreciated over 27.5 years. I myself would expense it, if the invoice cost was less than $2,500. Just keep in mind that when you expense it, there is absolutely no change of of your cost basis in the property.