asset depreciation category

[lllbby]

I'm adding a rental asset for depreciation purposes. There are 3 categories to choose, "residential rental real estate", "Appliances, carpet and furniture", "land improvements". They depreciate over different periods of time.  For a bathroom remodel project that replaces the tiles, vanities, and shower doors, should I pick the first one or the second one or either is fine? For backyard fence and landscaping work, is "land improvements" the right category to use?

[PatriciaV]

The bathroom remodel would be entered as "appliances, carpet, furnishings" and the landscaping would be Land Improvements.

However, you may wish to consider claiming the Safe Harbor Election for Small Taxpayers. If you choose this election, you can expense up to $10,000 in costs that would otherwise be depreciated over a very long time.

You'll find this election at the start of the Assets/Depreciation section from the Rental Summary screen for each rental property. If you have already visited this section, you may review your answers by choosing "No, I want to review..."

[rayguy51]

A remodel would be depreciated as appliances, carpet, furniture. Fencing and landscape would be under the land improvements only if they were non-maintenance items [painting, pruning, grass cutting services] - those would be direct expenses.

[abrdfd]

This is very interesting.  I cannot find any table of asset categories for depreciation anywhere.  I have recently added insulation to a rental property that exceeded the costs to allow as an expense, and none of the available categories make obvious sense.  But then I would never think to put a bathroom remodel under "appliances, carpet, furniture".  Is that a big umbrella category for physical materials added to a building and therefore applicable to insulation as well?

[VictoriaD75]

Per IRS Publication 527, Residential Rental Property, insulation can be capitalized for depreciation purposes. This means, you could add the cost of the insulation to the basis of the property and depreciate it along with the residential real estate property. The publication also states "The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property."

Publication 527, Residential Rental Property

[M-MTax]

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@PatriciaV wrote:

The bathroom remodel would be entered as "appliances, carpet, furnishings"....

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Unless the cost of @lllbby's bathroom project qualifies for the de minimis safe harbor election ($2,500 or less), the project would be categorized as residential real estate and capitalized as such and not categorized as "appliances, carpet, furnishings". The remodel constitutes an improvement to the real estate and cannot be considered to be personal property.

See https://www.irs.gov/publications/p527#en_US_2024_publink1000280324