Rental property

[Pacun]

Tax payer bought rental house in 1999 and in 2006 had these expenses:

Painting $2,000.00

Replace Dishwasher $500.00

Replace Faucets, showers, $800.00

Replace Kitchen floor $565.68

The rental house adjusted basis is $170,000 after depreciation for 2005. The house was painted in 1997 and repainted in 2006. I understand that I need to depreciate the floor, painting and the dishwasher. Do I add the painting and kitchen floor to the basis and continue regular depreciation? Or I have to start a new depreciation for those items using 27.5 years? Should I expense or 179 the dishwasher?

Thanks in advance.

[RJM]

I always deduct painting as maintenance & repair expense. It does not extend the life, etc. The dishwasher and floor are 5-year MACRS items, and the faucets and showers I am guessing should be 5 year items, but if any piping was replaced this should probably be 27.5 year property. Anyone have better suggestion for the faucet and showers? -Bob

[BulldogTom]

I always deduct painting as maintenance & repair expense. It does not extend the life, etc. The dishwasher and floor are 5-year MACRS items, and the faucets and showers I am guessing should be 5 year items, but if any piping was replaced this should probably be 27.5 year property. Anyone have better suggestion for the faucet and showers? -Bob

Not technically correct, but I would make the argument that all of it is maintenance, and that the amounts are de minimus anyway, and expense the whole thing(perhaps I would depreciate the dishwasher).

Tom

Lodi, CA

[joanmcq]

Can't Sec 179 any rental expenses to start. I've always depreciated a major paint job, not touch ups. And appliances are distinctly mentioned in IRS pub 527...there is no 'de minimus'. Kichen floor depends; did you replace the floorboards, or linoleum? Carpets are 5 year, so I would expect lino, etc to be the same.

[Pacun]

Thank you for your replies.

joanmcq, If this is a major painting job, you would depreciate it, how many years?

[OldJack]

I agree with BullDogTom. Expense everything as repairs. The only thing of real question is the dishwasher and its a small amount. Good Grief...I would never depreciate paint!! If paint isn't an expense real estate taxpayers are in real trouble.

[kcjenkins]

Paint is a normal repair and maintenance item. New siding would be depreciated.

[joanmcq]

Jeez, do you guys paint every year? I got an estimate to paint my house at $10,000. On a rental, I'd depreciate at 5 years. If I had to do it because the last tenant trashed the place, then I'd consider it a repair.

[jainen]

>>On a rental, I'd depreciate at 5 years.<<

I don't think there is any authority to depreciate paint over five years. If it isn't a repair, then it's 27.5 years as part of the building.

All the work in the original post is repair (except the new dishwasher). Those jobs don't extend the life of the building or make it suitable for a new use. They simply restore it to the condition it was in before the damage occurred. It doesn't make any difference whether the damage was something specific like vandalism or just normal wear & tear. You could argue that paint prevents deterioration, but that is not the same thing as extending the life.

In some cases new faucets or floors could constitute an upgrade, which would go to depreciation. I'm assuming that is not the case here because such a low cost indicates poor or average quality.

[OldJack]

>> paint my house at $10,000<<

Like a hooker, price is irrelevant, classification is all that matters. Either it is or it isn't.

[GeneInAlabama]

I got an estimate to paint my house at $10,000.

The first time I BOUGHT a house, it cost less than $10,000.

[Slappy Tax]

Pub 527, pg 3: "Repairs: A repair keeps your property in good operating condition. It does not materially add to the value of your property or substantially prolong its life. Repainting your property inside or out, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows are examples of repairs."

[The same page shows a table with examples of improvements.]

[kcjenkins]

And while Pubs are not 'authoritative sources', in this case this one is totally right. Paint is always maintenance, not a capital improvement, regardless of how much it costs.