Originally Posted by clobber
#1:One followup question: How do I handle appliances that were being depreciated (dishwasher, fridge) that I purchased while renting out the property?
#2;They were sold included in the sales price of the house.
#1;You need to report them on Sch E of 1040 to reduce your taxable rental income; while small purchases and repairs can be deducted from your taxes, large purchases and expenses must be depreciatated over several years. The IRS issues guidelines for how to depreciate various assets, including not only appliances, but also used appliances. As long as you purchase an appliance for your rental property, it can be depreciated for five years. You begin depreciating in the year in which the appliance was purchased and placed in service. Your purchase price in the beginning year is your cost basis. You are allowed to depreciate the full cost of the appliance in the five years you have it in service at your rental property. Used appliances can be depreciated the same way as new appliances. Your cost basis is what you paid for it, not what it was worth new. You still get five years to depreciate it, until you recover the purchase price fully. If you purchase it and take it out of service in the same year, you cannot depreciate it. In such a case, you would write it off as an expense for the current year. You should stop depreciating your appliances when you have fully recovered your cost basis, even if you continue to use the appliance in your rental property. You also stop depreciating when you retire the appliance from service, even if you have not received the full cost basis at that time. If you begin using the appliance for personal use, you must stop depreciating. A business can use Section 179 to deduct tangible, long-term personal property. However, Section 179 specifically excludes personal property used in *residential rental property. This means that landlords can’t use Section 179 to deduct the cost of items they purchase for use inside rental units for example, kitchen appliances, carpets, drapes, or blinds.In the case of bonus depre., for2008, 2009, 2010 the IRS allows for 50% bonus depreciation for new items purchased for a rental property. What this means is the property owner can take half of the purchase cost (plus sales tax, delivery charges and setup fees) as a depreciation deduction the first year and then take the other half and depreciate it as normal. This results in more than 50% of the cost of the new purchase becoming a depreciation deduction for the first year (bonus half plus the "normal" percentage of the other half). Bonus depreciation applies to new appliances/carpets/window coverings, etc. only, not used. You must tell the IRS on your tax return if you plan NOT to take the bonus depreciation method. If you take bonus depreciation for one item purchased for a property you must take it for all depreciable items for that property purchased in that year.
#2;correct they were included as part of your selling price.