Depreciating personal property

[Ari Bachrach]

A question on depreciation for residential investment properties. When calculating depreciation, the regular schedule is to depreciate the property over 27.5 years. Do I need to separate out personal property (appliances and the like) and depreciate them at a different rate? If so, how do I calculate their value? Do I need an assessment or is a general estimate good enough?

[Dave Toelkes]

@Ari Bachrach

Despite Paul Allen's comment, you are using the term "personal property" correctly.  Yes, personal property can be depreciated separately and on a faster schedule than the dwelling structure.  Personal property generally does include free standing appliances.  Think of it this way:  if you could pick up your property, take off the roof, and turn the building upside down, everything that would fall out is probably personal property.  Furniture and appliances that you provide for the tenants' use is personal property that can be depreciated on a 5 year schedule.  Stuff that does not fall out of your rental property (like the water heater and the HVAC system) are structural components of the dwelling structure and are depreciated along with the structure over 27.5 years.

Typically, when I buy a property and used appliances convey with the property, I just wait until the appliance has to be replaced, then I depreciate the full cost of the replacement as a separate asset on a five year schedule.  If you did not want to do this, then figure out what the thrift shop value of the used appliance is, subtract that amount from the depreciation basis of the dwelling structure, then depreciate the thrift shop value of that appliance on a five year schedule.