Guide for rental owners
The de minimis safe harbor for landlords
Write off items up to $2,500 right away, instead of over years.
Normally, a new appliance or water heater for your rental is depreciated over several years. The de minimis safe harbor lets you deduct lower-cost items in full the year you buy them instead.
How it works
- Items costing $2,500 or less (per item, or per invoice) can be deducted right away, if you don't have audited financial statements (most rental owners don't).
- It's an election you make each year, with a short statement attached to your tax return, filed on time. Your CPA takes care of it.
- It applies to every qualifying item that year, not just the ones you pick.
- You should already be treating items under the limit as expenses in your own books from the start of the year.
Example
You replace the fridge in Unit B for $1,450. Depreciated over 5 years, it saves about $93 in tax this year. Expensed under the safe harbor, about $464 comes back this year (at a 32% rate).
Is it always the right call?
Usually, but not always. If your rental already shows a loss you can't use this year, deducting more now may not help right away. That's a question for your CPA, who sees your full picture. See passive loss carryover for why.
Tethered Properties does this for you
When you log an upgrade of $2,500 or less, Tethered Properties shows both choices side by side (expense it now, or depreciate it) with what each saves, and adds it to your questions for your CPA. Tap their answer and your numbers update.
This guide is general information for rental owners, not tax advice. Tax rules change and every situation is different; your CPA or tax advisor knows your full picture. Figures are estimates.