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rental repair vs. improvement?

Repair or improvement? I'm going back and forth in my own mind about these:

1) Electrical panels had water leaking in to the boxes due to rotted cover on the supply cable. Boxes had to be replaced because of rust and the fire hazard caused by the water, along with all the breakers. Repair or improvement?

2) Water heaters reached their end of life (about 10 years old). I replaced them, rather than waiting for them to rust out and flood the finished basement. Repair or improvement?

3) Water heater rusts out, tenant has no hot water. Heater must be replaced. Repair or improvement?

4) I bought a building that needed substantial repairs (bank-owned, trashed by tenants, etc). I understand that all repairs prior to renting are improvements which have to be depreciated. Are all costs depreciated over 27.5 yr SL? Or can I break out new appliances, doors, flooring, etc. and depreciate at a faster rate such as 7 yr DDB?

Thanks.

Reply to
way111
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This one is a push. If the new panel etc is better (meets newer code, better access to breakers, etc) then it is an improvement. If the new panel is the same as the old one it is a repair. I doubt if any one will question which you choose as long as as you can rationalize your choice

If you were a home owner both would be considered as adding to the basis (an improvement) - Also water heaters tend to improve (life, efficiency) with each new model. A rust out could be justified as an a end of life event.

Appliances are definitely short lived. Doors and flooring (but not carpets) are long lived.

Reply to
Avrum Lapin

Any panel today is probably better than one 10 years ago (better efficiency, code, access to breakers, etc). But this would pretty much mean that every replacement is an improvement, as (almost) anything today is better than it was 10 years ago. So I think a fair approach is to figure out the cost of the item 10 years ago, adjust for inflation over 10 years (such as 10k becomes

10k*(1+0.03+0.045+...)k), and the amount over 15k would be a capital improvement. But I doubt this is the way it is done as it is so complicated. And besides, inflation is different for electrical equipment than inflation in general, so what numbers would one use?

If it's EOL, then it's a repair?

There can be different depreciation for different items.

Reply to
removeps-groups

I think what you'll find is that - does the expense increase the useful life of the entire structure (a replacement panel would not), or change the use/purpose of the structure (from a 110v 42 circuit panel to a 277v box for handling small industrial manufacturing equipment and machine loads). If it does either, then it's an improvement to be depreciated. Or if it wasn't there to begin with, and you are just now installing power to a structure, it's an improvement.

Just replacing the panel is a repair, rewiring the whole house, maybe a different story.

Reply to
Paul Thomas

The service itself wasn't changed - its the same amperage, same number of circuits. It's breakers now instead of fuses, but there is really no choice, I think that is a code issue.

"Does the expense increase the useful life of the entire structure"? By this criteria, it seems like virtually everything is a repair. The building's useful life should be at least another 50-100 years. No water heater or window or roof or whatever will last that long. Is this really the case?

I'm a bit confused by the end-of-life comment. Does waiting for something to fail make it a repair?

Reply to
way111

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