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Does landscaping renovation at a residential rental property qualify for either section 179 or 100% bonus depreciation?

lmscpa
Level 3

Client had a tree fall down from winds and has made about $20-30K of improvements to the landscaping at a residential rental property that he owns with his son. He asked if that expenditure will qualify for either section 179 or 100% bonus depreciation.

He provided a link to an article that seems to claim that the expenditure qualifies for  being completely written off in the year of the expenditure (this year).    

https://www.millionacres.com/taxes/depreciation/how-bonus-depreciation-affects-rental-properties/

My research shows that that type of expenditure does not qualify for the 100% bonus depreciation since this was made to the exterior of the residential rental property. I can't find anything specific about whether or not the expenditure qualifies for Section 179. Is this 15-year property that qualifies for Section 179?

I feel that an expenditure of that amount may be too much to qualify as "Repairs" even though it was made after the wind event caused the tree to fall down in the yard (not on the house).

If anyone has an opinion as to whether or not this expenditure will qualify for either Section 179 or 100% bonus depreciation, or expensed as repairs, it will be greatly appreciated.

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4 Replies 4
TaxGuyBill
Level 15

You would get to get very specific details about the "landscaping".  Note what Publication 946 says, and the example it shows.  But be aware some things like fences, walkways, etc. could be a "land improvement", which should qualify for Bonus, but not 179.

 

You cannot depreciate the cost of land because land does not wear out, become obsolete, or get used up. The cost of land generally includes the cost of clearing, grading, planting, and landscaping.

Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property.

Example.

You constructed a new building for use in your business and paid for grading, clearing, seeding, and planting bushes and trees. Some of the bushes and trees were planted right next to the building, while others were planted around the outer border of the lot. If you replace the building, you would have to destroy the bushes and trees right next to it. These bushes and trees are closely associated with the building, so they have a determinable useful life. Therefore, you can depreciate them. Add your other land preparation costs to the basis of your land because they have no determinable life and you cannot depreciate them.

https://www.irs.gov/publications/p946#en_US_2020_publink1000107320

 

lmscpa
Level 3

Thank you for your reply.

I will get the specifics of what landscaping work was done and apply the 100% bonus depreciation on the qualifying amount.

Terry53029
Level 12
Level 12

Your client should be able to take a casualty loss for the tree and cleanup/removable of the tree, but it sounds like your client did more than cleanup (only you have all the details) He should be able to estimate the value of a lost tree, and he has the cleanup cost. In my part of the country maybe he has a $3000 to $5000 loss. I think the rest would be a capital improvement

lmscpa
Level 3

Thank you for your reply, Terry.