Residential rental property: how to capitalize improvements

Forum|Forum|2 years ago
October 12, 2023
2 replies
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Hello, I have a client who made improvements to his residential rental property. What asset class should I select for these improvements?

1) kitchen/bathroom remodeling: J5 - qualified improvement property?

2) New appliances: F - Rental furnishings?

3) New windows: J5 - qualified improvement property?

4) New roof/HVAC: J6 - Roofs/HVAC/Fire/Alarm/Security?

I'm confused because under the definition of Qualified Improvements or Qualified Leasehold Improvements, it refers to "commercial" buildings. The property is residential..

ProSeries Professional

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Best answer by TaxGuyBill

@HN49_2 wrote:

Hello, I have a client who made improvements to his residential rental property. What asset class should I select for these improvements?

1) kitchen/bathroom remodeling: J5 - qualified improvement property?

2) New appliances: F - Rental furnishings?

3) New windows: J5 - qualified improvement property?

4) New roof/HVAC: J6 - Roofs/HVAC/Fire/Alarm/Security?

I'm confused because under the definition of Qualified Improvements or Qualified Leasehold Improvements, it refers to "commercial" buildings. The property is residential..

Exactly. So #1, #3 and #4 would be depreciated a Residential Rental Property, usually over 27.5 years.

Although there is a good argument that merely reshingling is not a new "roof" (at least in some cases) and could potentially be deducted as a repair.

T

TaxGuyBillAnswer

Level 15

@HN49_2 wrote:

Hello, I have a client who made improvements to his residential rental property. What asset class should I select for these improvements?

1) kitchen/bathroom remodeling: J5 - qualified improvement property?

2) New appliances: F - Rental furnishings?

3) New windows: J5 - qualified improvement property?

4) New roof/HVAC: J6 - Roofs/HVAC/Fire/Alarm/Security?

I'm confused because under the definition of Qualified Improvements or Qualified Leasehold Improvements, it refers to "commercial" buildings. The property is residential..

Exactly. So #1, #3 and #4 would be depreciated a Residential Rental Property, usually over 27.5 years.

Although there is a good argument that merely reshingling is not a new "roof" (at least in some cases) and could potentially be deducted as a repair.