rental depreciation

Forum|Forum|3 years ago
March 15, 2023
5 replies
39 views

Would purchasing a new refrigerator for a rental property be classified as an asset or an expense?

Vanessa A

Level 15

A refrigerator is technically an asset. However, if it cost less than $2,500 you can take the Safe Harbor De Minimus election and enter it as an expense instead of an asset.

If it cost more than $2,500, then you would enter it as an asset and either depreciate it over 7 years or take the Section 179 depreciation to fully depreciate it in the year of purchase or a combination of both.

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strubiAuthor

Level 2

Re fridge - noted, thanks

Also...

SCHEDULE E (Form 1040) #18 Depreciation expense or depletion

In prior years our tax accountant placed a lump sum amount in the section. What is the formula for calculating is depreciation and where/how should we put this amount into the Assets/ Depreciation section?

AmyC

Level 15

The formula for calculating depreciation is many with multiple factors. See Publication 946, How to Depreciate Property.

Once you locate all assets being depreciated, enter them into the program. On your rental summary, you will see Assets/ Depreciation. Enter items there. Beware, the program will ask the cost of the house, then the value of the land. The difference is the amount being depreciated.

Depreciation varies with the asset placed in service. You will need to enter each asset, date placed in service and more. You will need the 4562 from when each asset was placed in service to know what method, years of recovery, and cost.

Alternatively, you could call the accountant and ask them to give you a detail of the assets if it is not in your paperwork.

About Form 4562, Depreciation and Amortization

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strubiAuthor

Level 2

We purchased/ downloaded the Premier version and under Assets/ Depreciation it didn't prompt us to enter the land/ house cost for depreciation. Do we need to upgrade to Home /Business version?