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I am back to doing my taxes. I have decided to take a stab at form 4562. I have decided to do the following.

1. Use the 85% of the tax assessors value of the property as the depreciable basis. I think saying the land is worth 15% and the building 85% is reasonable. I have no better guess of the value at the time of inheritance (12/03) than the assessors value.

2. I am classifying a new refrigerator, used furnace, parking restricted sign, CO detector/smoke alarms, Doorbell parts, and window rescreening costs as 7yr property.


I would consider the sign, doorbell parts, and window rescreening as repairs, not capital improvements. I might even consider the furnace replacement as a repair in light of recent tax court decisions related to roof replacement. If you depreciate the furnace, it is 27.5 year property. Assuming that the CO detector/smoke alarms are a new installation and not a replacement of existing equipment, they are new depreciable assets as would be the refrigerator. All of these items are 5 yr property.

3. I am classifying a jigsaw, powerscrewdriver and weed clippers as 5 year property.

4. I have elected not to include the cost of copper tubing, aluminum ducts, etc. and other similar supplies as depreciable.


To the extent these are for new heating/plumbing systems, these are depreciable costs with 27.5 year recovery. To the extent they are replacements that do not improve the respective systems, but only return them to servicability, they are expenses.

This leaves me with the question of how to classify painting costs. The paint job is guaranteed for 2 years. Do you have any thoughts on this or the above classifications.

Painting is a repair.

Seeing how you really don't have a handle on which of these costs are depreciable and which are expensable, nor what the appropriate recovery periods are, you really should consult with a professional. Once the rental property records are set up correctly, you can take over future years' taxes.

Note that some of what I have posted above differs from what you will find in the IRS Publications. The IRS has taken positions in its publications which it has not been able to defend in Tax Court -- another reason to consult with a tax professional to better learn what you can and cannot claim on a rental property.

Ira
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