Depreciation on foreign property

[STEPHAN]

What is the name of your state? FL

I have a foreign property.

I found this:

All foreign property must be depreciated using the Alternative Depreciation System (“ADS”). Therefore, the property's depreciable life will be 40 years for commercial properties and 30 years for residential rental properties that were placed into service after January 1, 2018. The requirement to use ADS also precludes the use of bonus depreciation on any of the foreign property. Similarly, equipment purchased for the rental property cannot use IRC Section 179 to accelerate the deduction on the purchase of the equipment; it must be depreciated over its applicable life.

Does that mean that I need to depreciate a new kitchen ($9800) over 40 years? That would make no sense to me.

 

[davew9128]

Why doesn't it make sense to you? Other than the recent change to 30 years for residential, this has always been the case for foreign depreciable assets.

 

[adjusterjack]

Ask a tax pro if you can take it as a one time expense.

 

[STEPHAN]

Why doesn't it make sense to you?

The lifespan of a kitchen is much less.

 

[davew9128]

The lifespan of a kitchen is much less.

I don't see that as at all relevant.

 

[davew9128]

Ask a tax pro if you can take it as a one time expense.

"It depends".

 

[LdiJ]

What is the name of your state? FL

I have a foreign property.

I found this:



Does that mean that I need to depreciate a new kitchen ($9800) over 40 years? That would make no sense to me.

40 years is for a commerical property. It is 30 years for residential. However that is for the real estate itself.

However it would seem to me that this part would apply to a kitchen:

"Similarly, equipment purchased for the rental property cannot use IRC Section 179 to accelerate the deduction on the purchase of the equipment; it must be depreciated over its applicable life."

The follow article:

Alternative Depreciation System: What Is It? (thebalancesmb.com)

Indicates the calculation system for ADS and an assets useful life. I think that if you do some more digging and study into the matter than you will be able to figure out the applicable useful life of a kitchen and then how to depreciate it under ADS.

 

[Taxing Matters]

Does that mean that I need to depreciate a new kitchen ($9800) over 40 years? That would make no sense to me.

For a residential property it's going to be 30 years depreciation for the structure and permanent improvements to the property (you cannot depreciate the land itself). But as to certain parts of the kitchen, like the appliances (oven/stove, dishwasher, etc) you'd depreciate those separately over their useful lives.

 

[LdiJ]

For a residential property it's going to be 30 years depreciation for the structure and permanent improvements to the property (you cannot depreciate the land itself). But as to certain parts of the kitchen, like the appliances (oven/stove, dishwasher, etc) you'd depreciate those separately over their useful lives.

If this is a residential kitchen in many countries you do not buy a house with a kitchen. You get a bare space instead. You have to build the kitchen from scratch and you take all of it with you when you sell, even down to the kitchen cabinets. Many times the cabinets are more like furniture than what we would consider to be kitchen cabinets.

 

[davew9128]

If this is a residential kitchen in many countries you do not buy a house with a kitchen. You get a bare space instead. You have to build the kitchen from scratch and you take all of it with you when you sell, even down to the kitchen cabinets. Many times the cabinets are more like furniture than what we would consider to be kitchen cabinets.

Which would make them 10 year property under ADS. I might look for a way to utilize the repair regs and a de minimis election under 263 where possible.

 

[STEPHAN]

Thank you!