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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121482  
Subject: Depreciation Date: 4/19/2011 3:33 PM
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This item does not apply to 2010 (which is thankfully over for us) but to 2011.

My wife has a small business renting a cottage on a lake. She decided to have the spare bedroom renovated. In doing so they found that squirrels had damaged some of the wiring in the ceiling and that the cottage wiring would have to be brought up to code.

My question is that rewiring is almost all labor plus a relatively tiny amount going to the new wires, perhaps a new circuit breaker box, etc. Can we depreciate the whole bill?

When a house is built, you do not separate the cost of the materials (maybe 10% of the total bill) from the labor (around 90%) but depreciate the total bill so my guess is that we can depreciate the whole bill because, with the rewiring, the whole thing will have to be done again in say 15 or 20 years or so.

A part of the cottage harks back to around 1890 and the electrician said he would guess the wiring was done in the 1920s.

brucedoe
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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113216 of 121482
Subject: Re: Depreciation Date: 4/19/2011 3:53 PM
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My wife has a small business renting a cottage on a lake. She decided to have the spare bedroom renovated. In doing so they found that squirrels had damaged some of the wiring in the ceiling and that the cottage wiring would have to be brought up to code.

My question is that rewiring is almost all labor plus a relatively tiny amount going to the new wires, perhaps a new circuit breaker box, etc. Can we depreciate the whole bill?


I can't answer what I think your question ought to be, so for the benefit of the pros, let me re-work things a bit.

You seem to be asking whether labor is a valid expense. Of course it is if you're paying someone. You cannot charge your own time as an expense.

I'm not sure we're both looking at the word "depreciation" the same way. Capital improvements are depreciated over the prescribed life of the property. Repairs are expensed entirely in the year paid.

To me the question is whether the electrical part of this project could be expensed or must be depreciated and, if the latter, over how many years.

Phil
Rule Your Retirement Home Fool

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Author: MarinBMWZ4 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113226 of 121482
Subject: Re: Depreciation Date: 4/19/2011 9:16 PM
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I would go with this: if the repair is a "simple" and isolated repair: i.e. replace a lamp and switch, etc. I would expense it for the tax year of the expense. If you are rewiring the whole house I would depreciate it. I suspect the depreciation schedule would be the same as for the home, not like it is for the fridge or dishwasher.

MZ4

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