Anyone familiar with the SHST (Safe Harbor for Small Taxpayers)

[Michael K.]

Anyone familiar with the SHST (Safe Harbor for Small Taxpayers) - any insight here would be very much appreciated. Thank you!!

1) I understand the safe harbor to be the lessor of $10k or 2% of the unadjusted basis of the property. But the amount is only for R&M and improvements (like new appliances), correct? So I understand that the number for safe harbor purposes does NOT include any other operating expenses like landscaping, utilities or insurance?

2) Apparently, you are supposed to attach a letter saying that you elect to use the safe harbor. But what if you are filing electronically? Can you still attach this notification?

3) As an example, let's say new appliances are part of your safe harbor number, where do you put this on Schedule E? There is no line item for improvements like new appliances. So I guess you put that figure on Line 19 -"Other"?

[Dave Toelkes]

@Michael K.,

Although the safe harbors are available that allow certain depreciable items to be expensed, they are optional.  You can continue to depreciate capital items under the prior depreciation rules if you wish.  

For my own properties, I am already at or near the maximum net passive loss allowance. Expensing a new water heater rather than depreciating it will just increase my suspended loss carryover.  So, I have decided to ignore the new safe harbor rules and continue depreciating new capital assets under the old rules.