Where do I put Capital Improvements on a rental property?

[rniedt]

I replaced the septic system at my rental property. How do I include this capital improvement in my tax return and what is the best way to use any deduction (over a period of time and how long)?

[Cindy0H]

This would be entered as an asset. The IRS considers a septic system to be a capital improvement rather than an expense on a rental.  So you'll depreciate it over 27.5 years rather than deducting it.   Here's how:

• Rental properties & Royalties...update
• On the Summary page...edit your rental
• Assets & Depreciation...update
• Did you make improvements...YES
• Rental real estate... describe: skip the land cost
• Purchased it new...used 100% for business

Here is a link to IRS Publication 527, Residential Rental Property, which discusses all aspects of this topic.  Note table 1-1 beginning on page 5.

https://www.irs.gov/pub/irs-pdf/p527.pdf