Expense or Capital Improvement?

[Michael Ruvido]

Hi All -

I have what I hope is a quick question for the tax professionals out there. The master bath in one of our rentals only has a jacuzzi tub, no shower head at all (weird, I know!). We're going to tear out the drywall around the jacuzzi, replace it with cement board, add a shower head, and tile the surround. The jacuzzi itself isn't being touched and the only plumbing is adding the water line up to the new shower head. Total cost is $3,200.

I know the De Minimus safe harbor rule allows you to deduct anything under $2,500 and that anything over this amount, if considered a capital improvement, would need to be capitalized and depreciated over a certain period of time (the life expectancy of the improvement). In your opinion, is doing the work I mention above a capital improvement or an expense? Why do you think it's one or the other? Any info you can provide would be appreciated!

Thanks!

[Jason Watson]

There are 3 safe harbors available to you-

De Minimis Safe Harbor Election

Safe Harbor Election for Small Taxpayers (sounds a bit condescending)

Safe Harbor for Routine Maintenance

Check these out...

Frankly given the amount, and what you are doing (low materiality to the plumbing system unit of property), I would expense it. Keep track of each little invoice, however. You might also qualify for the de minimis one that you mention since it is line item amounts 2,500 or less.

I don't see this as strict adaptation, and nor would it be betterment or restoration.