Depreciation

[voodoo]

Hi everybody,

My tenants have just moved out of my IP and I have no choice but to replace the carpet and paint the interior, It is poor and about 14yrs old.
I have had this place for 12months and I did get a depreciation schedule done back then.
How do i go about claiming depreciation on the new floor coverings and paint? and since it has ran out of life, is it still a capital exp or maintenance?

Thanks for any replies,

 

[Brenda Irwin]

Hi Voodoo, I am definitely not any expert but the term 'restoration to original purchase condition' comes to mind.

The painting if just a few rooms may well just be claimed as a repair. The new carpet would be started in a new depreciation schedule and the old carpet can be written off immediately.

Like I said, I am no expert and Dale is probably one of the best to answer, but I thought I'd take a stab in the dark just to see if I'm right as I might want to repaint and recarpet sometime soon.

 

[Corsa]

Hi Voodoo

Brenda's post is correct, just to add a little bit to this:

The new carpet is a depreciable asset that you can depreciate over 10 years.

The paint is deductible immediately if the expense is related directly to wear and tear and other damage that occurred as a result of renting out your property and did not exist and the time of acquisition.

This is the case even if you do all the rooms as long as the above criteria is met. The test here in determining whether it is not a repair if it:
-changes the character of the property
-does more than restore it's efficiency of function

If the properties condition was already poor when you purchased then it is not likely that the painting can be considered a repair but rather an improvement and not deductible.

The old carpet can be written down as you are no longer using this depreciable asset.

To do this, a balancing adjustment amount is worked out by comparing the asset's termination value (such as the proceeds from the sale of the asset) and its adjustable value at the time of the balancing adjustment event. If the termination value is greater than the adjustable value, the excess is included in your assessable income. If the termination value is less than the adjustable value, you can deduct the difference.

In your case the adjustable value is say $400 and the termination value of the carpets is $0 so you can deduct $400 from you taxable income.

Hope that this helps and others may be able to add to this

Cheers

Corsa

 

[voodoo]

Branda and Corsa thankyou for the replies, I will look into it.

cheers,

voodoo