what is the bonus depreciation for a residential real estate improvement

[AlexanderS08]

It depends. Assuming the residential real estate improvement is a rental (if it was personal use there would be no depreciation), the applicable recovery period determines whether or not the "improvement" to the property is eligible for bonus depreciation.

Those improvements that have a 15 or 20 year recovery periods are eligible for bonus depreciation. Anything longer than that is not eligible for bonus depreciation.

Also, improvements do not qualify if they are attributable to:

• the enlargement of the building,
• any elevator or escalator or
• the internal structural framework of the building.

[pclips]

We have had a rental property for 15 years. In 2019 we had to replace two(downstairs and upstairs) heating systems. This property has always been a rental property since we purchased it in 2004. Can we expense the heating system which cost us $15000 or do we have to depreciate it?

[AlexanderS08]

You would need to depreciate the heating system. If it is eligible for a special depreciation allowance then you may be able to take the entire amount in depreciation in the first year.

[pclips]

How would I find out if it is eligible for the special depreciation allowance?

[ReginaM]

Please see IRS Publication 946 for complete details of what you can deduct for Section 179 allowance.  

You can take a special depreciation allowance to recover part of the cost of qualified property placed in service during the tax year.

To qualify for the section 179 deduction, your property must be one of the following types of depreciable property.

1. Tangible personal property including Machinery and equipment, Property contained in or attached to a building such as a refrigerator or office equipment, gasoline storage tanks, livestock, portable air conditioners, and furnishing of lodging.
2. Other tangible property (except buildings and their structural components) used as:                                                                a. An integral part of manufacturing, production, or extraction, or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services;
3. A research facility used in connection with any of the activities in (a) above; or
4. A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities.
5. Single-purpose agricultural (livestock) or horticultural structures. regarding the use requirements that apply to these structures.
6.  Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum.
7. Off-the-shelf computer software.
8. Qualified improvement property.  Th is any improvement to an interior portion of a building that is nonresidential real property if the improvement is placed in service after the date the building was first placed in service.

The allowance applies only for the first year you place the property in service. 

[jrssite]

So I think that most of us get what qualifies as far as certain biofuel, reuse/recycle, certain plants that qualify. If not, the IRS publication 946 makes it pretty clear what qualifies as far as those things are concerned.

What a lot of people don't exactly get is, I think, more or less, SPECIFICALLY what exact type of properties that were acquired after Sept. 27, 2017 that qualify. It would be helpful if someone, somewhere, would compile a more or less succinct list of these types of items/property. Has anyone done that yet? Thanks!

[ReneeM7122]

Money spent to improve the property is depreciated.   An improvement is anything that enhances the value or usefulness of a property, restores it to new or like-new condition, or adapts it to a new use.

The list of potential improvements is endless, but common improvements include:

• Building new additions or garages
• Installing new systems, such as heating or air conditioning
• Replacing the roof
• Adding wall-to-wall carpeting
• Installing accessibility upgrades, such as a wheelchair ramps

To qualify for bonus depreciation, the asset has to be used for business at least 50% of the time.

Real estate property that qualifies for bonus depreciation is as follows:

• Qualified improvements to commercial buildings placed in service after 2015 and before 2018
• MACRS property with a depreciation period of 20 years or less (including qualified improvement property placed in service after 2017)

@jrssite

[Kbichard]

Is a drinking water well done for rental property eligible for Bonus Deprecation?  
I'm unclear on its useful life. I've seen both 15 and 27.5 years.

[MarilynG1]

@Kbichard Since a drinking water well is a Rental Real Estate Property asset (Land Improvement), you can depreciate it over 15 years.

New depreciation rules for 2020 allow for 100% bonus "expensing" of assets that are new or used.

Click this link for more info on Depreciation of Business Assets. 

[Edited 4/14/2021 | 1:49 pm]