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Tuesday, April 28, 2015

Deducting Appliances for Rental Property in the U.S. on 1040NR

How To Deduct Appliances for Non Residents

It is typical for Canadian snowbirds to rent out their property when they are not around, or to purchase a rental property in the U.S. The question arises of buying new appliances, as sometimes the old ones just have to go and new stove, fridge, and microwave are needed.

Here's what you need to know about deducting appliances on your 1040NR schedule E tax return.

  • Appliances should be considered assets (not expenses)
  • These appliances must typically be "attached" to the home (portable toaster would not qualify, but mounted microwave over a stove top would).
  • Appliances (fridge, stove, dishwasher, mounted microwave) will be depreciated for 5 years
  • Include sales tax, freight charges, installation/testing charges
  • Amount must reflect tenant occupancy (Read Below)

So what happens if you rent out your vacation home part of the year and live in it the other part? You may still be able to depreciate the appliances, but you will divide the amount by the ratio of personal use of the property.

For example: Jane from Canada lives in her condo in Phoenix, Arizona for 3 months each year. The other 9 months she rents it out to vacationers. She purchased a new refrigerator, stove top, oven, mounted microwave, and built-in wine cooler. The cost of the appliances was $6,500, sales tax was $360, delivery was another $250 and the contractor charged her $1,000 to install them. On her 1040NR, she will fill out a form 4562 to include the purchase of the appliances. The total allowable amount would be:

($6,500+$360+$250+$1,000) X (270/365*) = $5,999.18

*[the amount of days the property was used as a rental]

We provide income tax preparation for Canadians and non residents who own rental property in the U.S. We would be happy to help you prepare and file your U.S. return, our flat rate fee is $250 (one rental property) for state and federal returns.

Please call Borders Bookkeeping.

(760) 895-3516