Depreciation of Improvement non-Residential rental property

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- Ron Rosenfeld
  
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posted
11 years ago

Fri, Jan 4, 2013 3:11 PM

I own 50% of a property that is a medical office condominium (in a building that consists of a number of these units), and is leased to a third party. As owner, I am also responsible for a percentage of the common space. In Aug 2012, I was billed for my share of some renovation expenses -- approximately $4,350. I believe this included items such as window replacement and sealing, carpeting, etc. (I am in the process of obtaining the details and dates). The building itself was placed in service in 1981. Since these were items that will increase the useful life of the property, I am assuming I must depreciate rather than expense them. But I'm not sure of the method to be used. Guidance please?? Thank you.

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posted
11 years ago

Sun, Jan 20, 2013 6:19 PM

My impression of the new stricter repair versus capital improvement rules is that these are repairs. According to

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capital improvement Improvements that "put" property in a better operating condition Restores the property to a "like new" condition ...

repairImprovements that "keep" property in efficient operating condition Restores the property to its previous condition ...

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But it still looks subjective. The new windows are likely to be more efficient, which would make it a capital improvement. Still, in theory windows today are better today than they were last year, which would make any windows replacement a capital improvement, so by logic it they should all be repairs to me. Replacing the carpet also sounds like a repair.

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- Ron Rosenfeld
  
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posted
11 years ago

Sun, Jan 20, 2013 8:47 PM

Thanks for your advice. Actually, I mis-wrote about the windows -- I was mis-remembering a different event. And that article you quote seems a lot clearer than anything I've ever read from the IRS. I ran across a few things that led me in the direction of repair after I had posted this, and I'm glad you have clarified things for me.