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New Member
posted Jun 1, 2019 10:51:03 AM

Where do I put Capital Improvements on a rental property?

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)?

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New Member
Jun 1, 2019 10:51:04 AM

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