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Huge one-time cost incurred on rental unit


I rent an apartment in my house out (it’s a duplex). I just had to replace the hot water heater and boiler, which came to more than I collect on rent over a year, and there are still other repairs I will be making to the tune of $1,000-$2,000 over the year.
Since I’ll be losing money on the rental in 2019, do I just declare it all as-is (e.g. ‘I made $9,600 and lost $12,000 on this thing’), or are there ways to spread the cost over two tax years (‘I made $9,600+$9,600 and spent $6,000+$6,000)?

Also, really hard lesson learned here: Take every asset you’re responsible for in your home (roof, siding, fridges, boilers, water heaters, cost of painting rooms, dishwashers, laundry, etc.) and divide their total replacement costs by their lifetimes. I dramatically underestimated what the upkeep would be, and it almost sank me.


Someone answered:

You may depreciate the HWH and boiler over time. Whatever software you are using will ask you (as part of the Schedule E Q & A) about depreciable property you placed into service in 2018. Since you also live at the property, I would suspect this is 50% business use 50% personal use; if that is the case, it would be prudent to not try to recover the entire cost of the HWH and boiler.

Edit: The repairs will be deducted in the year you paid for them.

Someone answered:

$2500 unicap safe harbor election, IRS code section 263(a)-1(f)

Edit: The other half of the answer is the losses up to $25k are deductible if your income is under a certain threshold. Otherwise they will carry forward and you'll get them somewhere down the road. Either when you have income or when you sell the place. You could depreciate it but unless you're expecting a big increase in income take the money up front.

Someone answered:

Have you looked into tankless? My old one just went out after 12 years of service, replacement cost was $200 and some of my own labor.