Can a water heater be treated as an appliance for depreciation?

[angi-mathochist]

I saw in an online forum that H&R Block advised someone to treat a water heater or tank as an appliance for depreciation. But I've read elsewhere that it must be treated as an improvement to the house. The 27.5 year depreciation life does NOT make sense to me for a hot water tank. They have the life span of an appliance, not of a house. Can I treat my new water tank as an appliance for depreciation?

[Carl]

Assuming you're dealing with rental property, since the water heater costs you less than $2,500, you are allowed to expense it and be done with it. Appliances are deprecated over 5 years. So for a $700 water heater, depreciating $125 a year will barely make a dent in your tax liability. A whole dollar each year if you're lucky maybe. Just expense it and be done with it. The IRS says you can do this under De-minimus Safe Harbor.

[TaxGuyBill · Accepted solution]

Unfortunately, a whole-house water heater is depreciated over 27.5 years (even though the real lifespan is much shorter than that).

It is considered part of the Plumbing System, which is depreciated over 27.5 years.  If it needs to be replaced before 27.5 years, then you would get the rest of the deduction when it is disposed of.

However, as Carl said, if you qualify for the De Minimis Election and choose to make that election, you may be able to deduct the entire cost in one year as a supply or repair.

[coby123]

I have only one rental property and the water heater had to be replaced in June 2019 because of a problem, do I qualify under Safe Harbor to expense this as the cost is under $2500 or do I need to depreciate over 27.5 years? This is for tax year 2019 that I am filing in 2020.

[coby123]

Do I qualify for the De Minimis Safe Harbor to expense my under $2100 water heater for my rental property? This is the only rental property I have and not sure if I qualify under Safe Harbor.

[Irene2805]

Probably.  The De Minimis Safe Harbor Election is an option you can take each year that lets you write off items $2,500 or less as expenses instead of assets

Here are the rules you need to meet to take this election:

• You don't have an applicable financial statement (most people don't).
• You have a consistent process for how you record expenses and assets.
• You record these items as expenses on your books/records.
• The cost of each item as shown on your receipt is $2,500 or less.

@coby123

[coby123]

Irene, appreciate you answering my question. I meet the criteria that you listed.

Thank You.