Posted by Frank Chin on February 13, 2004 at 07:21:05:
Tom:
We did section 179 years ago. But we’ve been expensing all items under $600.00 as maintenance or repairs the last several, as advised by our CPA, but not thru section 179.
The original post refers to a commercial property.
Frank Chin
Depreciation vs. expensing - Posted by Bob
Posted by Bob on February 10, 2004 at 06:46:32:
Is a new Air Conditioner / heating unit that BROKE down and replaced during 2003 considered an improvement or repair? (for a commerical rental)
If a repair, it will be expensed 100% in 2003.
If an improvement it will be depreciated as what and how long?
The old unit was 100% broken. It cost a bit over $2,000.
Thanks in advance,
Bob
Opps, see reply to Antoine - Posted by Frank Chin
Posted by Frank Chin on February 10, 2004 at 08:40:31:
Bob:
I posted the reply to Antoine in error.
Frank Chin
Re: Depreciation vs. expensing - Posted by Antoine (GA)
Posted by Antoine (GA) on February 10, 2004 at 08:00:57:
Bob,
In my opinion, replacing an A/C unit did not increase the value of your property, therefore, it should be considered as a repair. You should check with an accountant to verify. Check IRS Publication 527 for more info on repairs and improvements.
Re: Depreciation vs. expensing - Posted by Frank Chin
Posted by Frank Chin on February 10, 2004 at 08:39:04:
Antoine:
Here’s my thoughts on it.
1- Read thru IRS publication 946 available on the WEB “How to depreciate property”.
2- My CPA and I agreed that anything under $600.0 is expensed, though many CPA’s out there use a $500.00 threshold.
3- For a commercial property, looks like an AC its “7 year” property. Would be 5 years for residential.
4- If you use a CPA, review the year 2003 tax changes regarding “bonus depreciation” for qualified property. If it is qualified, you can depreciate 50% of it the first year.
5- AC is one of the items not allowed 179 expensing, so the law is against expensing such items in particular, so I wouldn’t push it.
In fact, I’m updating my acquired assets for 2003 in preparation for doing my RE and Business tax returns, and I’ll be reviewing the publication today, so I’ll update you if I find anything further.
Technically, the right way is to capitalize and then depreciate it. You might not get away with expensing if someone actually checks.
Frank Chin
Re: Depreciation vs. expensing - Posted by Ed Copp
Posted by Ed Copp on February 10, 2004 at 17:24:17:
179 expensing is not allowed for property that is rented (I think). Please confirm.
Thanks for the education (NTXT) - Posted by Antoine (GA)
Posted by Antoine (GA) on February 10, 2004 at 09:14:28:
…
Re: Depreciation vs. expensing - Posted by Frank Chin
Posted by Frank Chin on February 10, 2004 at 19:12:12:
Ed:
I took a look into IRS Publication 946, page 15, on section 179 elections and it states:
Eligible Property:
Tangible Personal Property does not include real estate but includes:
Excepted Property
-Air conditioning or heating units.
So my take on it is someone rehabbing a property, can take a section 179 election for appliances such as refigerators or stoves etc.
But in the case of air conditioning components, the law specifically denies it.
Frank Chin
Re: Depreciation vs. expensing - Posted by Tom Bazley, CPA
Posted by Tom Bazley, CPA on February 12, 2004 at 20:08:58:
Section 179 is not permitted on any tangible, personal property used in residential rental properties, which includes houses & apartments. Section 179 can be taken on personal property in commercial property, hotels, & motels.