A new refrigerator will do more for your rental than it will for this year's tax bill. Repairing an old appliance is deductible but installing a new refrigerator or stove is an improvement, not a repair. You can still write off the cost, but you have to do it over several years, by depreciating the purchase price.
The depreciation you can deduct each year is based on three things: the basis of the refrigerator, the length of the depreciation schedule -- which starts from the moment you install the appliance -- and your depreciation method. The basis equals the cost of the refrigerator, less expenses such as sales tax or shipping. You claim a big enough deduction each year that at the end of the depreciation period, you've written off the purchase.
You can depreciate your refrigerator over five years using the general method or nine years with the alternative method. With the general method you typically depreciate 20 percent when you install it, 32 percent the first year after that, then decreasing amounts over the remaining years. With the alternative method you take the same amount each year. The general method gives you a bigger deduction up front, but the alternative method gives you more years to claim a write-off.
If you or your family use the property for 14 days a year or more than 10 percent of the rental time -- whichever is larger -- you reduce your tax deduction to reflect the divided use. For example, if you use the property 20 percent of the year and rent it out the rest, you can only write off 80 percent of the refrigerator's depreciation. When the house or apartment is empty but available for rent, that counts as rental time.
If you're a real-estate professional, you report your rental income and expenses on Schedule C. Otherwise, use Schedule E to give the IRS the information, including depreciation. If your rental ends up in the red, the IRS won't usually let you deduct your losses from your non-rental income. You can carry losses over to a future year, however, when you have more rental income. The formula for deducting expenses is slightly different if you use the house for both personal and rental activity.
- Jupiterimages/Polka Dot/Getty Images
- Can You Claim Depreciation on Your House If It Sits Empty?
- Can I Claim a Loss for an Empty Rental Home?
- Tax Deduction for Investment Property
- Do New Cars Depreciate More Than Used Cars?
- Can You Deduct Renovations on a Rent House That Is Rented?
- Can I Claim Expenses on a House That We're Renovating but Have Never Rented?
- Can HOA Fees Be Used as a Tax Deduction for a Second Home?
- Can You Depreciate a Furnace?