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Generally speaking, all assets that will be used for more than one year (and are not trivial in cost, such as paper clips or extension cords) are treated as capital assets.
For property used in your rental activity, you cannot make the election to expense up to $125,000 in 2007 (indexed for inflation in later years through 2010) in new equipment in the year you purchase it, under Section 179 of the tax law.
Instead, you'll have to depreciate your rental property, any capital improvements you make to it, and any tools or equipment you need to carry out this activity, such as power mowers or tools, vacuum cleaners, and even your computer, cellular phone, and answering machine.
Aside from the lack of availability of the Section 179 expensing election, all the usual rules for depreciation apply equally to rental real estate. If the real estate is used for residential purposes, such as an apartment building, rental house, mobile home, houseboat, etc., the buildings and any capital improvements on it must be depreciated over 27.5 years. If the property is used for other commercial purposes, it must be depreciated over 39 years. Land itself is never depreciable; only the buildings and improvements on the land can be written off.
If you purchased property for personal use and then changed it to rental use, your depreciable basis will generally be the lesser of its adjusted basis, or its fair market value at the time of the conversion.
Depreciation is claimed on Form 4562, Depreciation and Amortization. Don't mix depreciation on rental property with any depreciation claimed on business assets; instead, file a separate Form 4562 for each activity you engage in.
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