We have incurred costs for substantial work on our residential rental property. We replaced the roof with all new materials, replaced all the gutters, replaced all the windows and doors, replaced the furnace, and painted the property’s exteriors. What are the IRS rules concerning depreciation? Replacements of the entire roof and all the gutters, and all windows and doors of your residential rental property: Are generally restorations to your building property because they are replacements of major components or substantial structural parts of the building structure. As a result, these replacements are capital improvements to the residential rental property. Are in the same class of property as the residential rental property to which they are attached. Are generally depreciated over a recovery period of 27.5 years using the straight line method of depreciation and a mid-month convention as residential rental property. Repainting the exterior of your residential rental property:

By itself, the cost of painting the exterior of a building is generally a currently deductible repair expense because merely painting is not an improvement under the capitalization rules. However, if the painting directly benefits or is incurred as part of a larger project that is a capital improvement to the building structure, then the cost of the painting is considered part of the capital improvement and is subject to capitalization. In this case, the painting is incurred as part of the overall restoration of the building structure. Therefore, the repainting costs are part of the capital improvements and should be capitalized and depreciated as the same class of property that was restored, as discussed above. Replacement of the furnace in your residential rental property: Is generally a restoration to your building property because it is for the replacement of a major component or substantial structural part of the building’s HVAC system. Therefore, the furnace replacement is a capital improvement to your residential rental property.

As with the restoration costs discussed above, these costs are in the same class of property as the residential rental property to which the furnace is attached. Is generally depreciated over a recovery period of 27.5 years using the straight line method of depreciation and a mid-month convention as residential rental property. Note: A taxpayer whose average annual gross receipts is less than or equal to $10,000,000 may elect to not capitalize amounts paid for repairs, maintenance, or improvements of certain eligible building property if the total amounts paid during the taxable year for such activities do not exceed certain dollar limitations. For more information, see Safe Harbor Election for Small Taxpayers in Tangible Property Regulations - Frequently Asked Questions. Publication 527, Residential Rental Property (Including Rental of Vacation Homes) Publication 946, How to Depreciate Property Sale or Trade of Business, Depreciation, Rentals Please provide your feedback.

1. Was it easy to find your information within the above Frequently Asked Question? 2. How satisfied are you with the information provided within the above Frequently Asked Question?sop for operation of air handling unit 3. If you still need help from the IRS, what would your next step be?car air conditioning repair cape town No additional help is needed5000 btu window air conditioner price Continue to search IRS gov web site The OMB number for this study is 1545-1432. If you have any comments regarding this study, please write to: Back to Frequently Asked QuestionsThe Protecting Americans from Tax Hikes Act of 2015 (PATH Act) contains a number of items related to depreciation. 

A few items merely extended the lapsed tax law from the prior December 31, 2014, expiration date through December 31, 2016.  Other expired provisions were either permanently extended or extended for five years, and many also had modifications made to their use. Two-Year ExtensionsThe following depreciation items were extended for two years, through December 31, 2016, without modification: The following depreciation items were extended for two years, through December 31, 2016, and had modifications to the prior expired provisions: Five-Year ExtensionsBonus depreciation for 50 percent type property was extended for five years, through December 31, 2019, but has a phase-out requirement attached. Bonus depreciation is allowed to be claimed on the cost of qualifying depreciable property after reduction for any Section 179 depreciation allowance. The bonus depreciation rate allowed under the new PATH Act provisions will be 50 percent for the period beginning January 1, 2015, through December 31, 2017.

The rate will then begin to phase-out, reducing to 40 percent through December 31, 2018, and to 30 percent through December 31, 2019. The ability of a corporate taxpayer to elect to use alternative minimum tax credits in lieu of bonus depreciation is still available beginning January 1, 2015.  But, beginning January 1, 2016, a modification allows a potential for increasing the use of unused AMT credits. In addition, new bonus depreciation provisions allow bonus depreciation to cover qualified improvement property that is not subject to a lease. The provision also removes the requirement that the improvement must be placed in service more than three years after the date the building was first placed in service. In addition, certain fruit or nut bearing trees, vines or plants are eligible for bonus depreciation at the time they are planted or grafted, rather than when they are placed into service. Permanent ExtensionPermanent extension status, effective January 1, 2015, was provided for the following lapsed tax provisions: