Taxpayer rents home from parents, AND pays for ALL repairs, improvements, etc. Home used as day care (42%) so Form 8829 is processed. In 2014 taxpayer replaces all windows with energy efficient, double pane windows. Can windows be depreciated on Form 8829? If so, over what period of time? Can non-business energy credit be taken? Thank you for your assistance~~!
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Yes, they can be depreciated. I would think they would be a 15 year "leasehold improvement". Your software might have trouble depreciating something on 8829 for 15 years (rather than 39). If so, you might need to depreciate it directly on Schedule C, using the Time/Space business percentage. If you do that, make sure the home office deductions are not limited, otherwise it would limit the windows as well.
Yes, the non-business energy credit can be taken. HOWEVER, with 42% as the business percentage, you can only use the non-business percentage (58%) for the credit. The credit will also reduce the basis of the house. -
TaxGuyBill
Thank you very much for the information TaxGuyBill~~!Comment
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also make sure it qualifies as ordinary and necessary to the business.Believe nothing you have not personally researched and verified.Comment
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TP does not own the house. According to the F5695 instructions, you must own the home. I would say he can not use the non-business percentage (58%) for the credit.Comment
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Good catch, you are right. Thank you for the correction.Comment
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OOPS! Return already filed
Return already e-filed~~! Oh well, if the IRS catches the $101 energy credit so be it~~!Comment
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Original Question Abandoned
The original question was whether the taxpayer could depreciate the windows, and TaxGuyBill was correct, although probably only as a leasehold improvement.
Y2K refers to Residential Energy Credit (Form 5965), which is a credit as opposed to a deduction. Only the owner can take the credit, but that was not the original question.
TaxGuyBill, you were right the first time.Comment
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