Section 179 deduction for HVAC system

[garyt22]

I have a rental property (4 plex) that is set up as an LLC.  I replaced 1 of the HVAC systems at a cost of $6,345 in 2022.  I believe I can deduct this full amount under Section 179, but I can't seem to find where to do this.  Under the "Rental Real Estate Summary" page, I click on "Add Another Rental Asset", and when I get to the page that describes the asset the closest description I can find is "Rental Real Estate Property. After that I can choose "Roofs/HVAC/Fire  and Security Systems".  But this lists "Nonresidential Property".  I'm I getting confused by semantics?  If the 4-plex considered a nonresidential property because it is an LLC, or am I simply not able to claim a Section 179 deduction for this HVAC unit because the apartment is considered a residence?

[AmeliesUncle]

Unfortunately residential HVAC does not qualify for Section 179; only non-residential qualifies.

I suspect this may not apply to you, but you said you replaced "1" of the HVAC systems and there are certain situations that could allow you to deduct the cost.  How many HVAC systems are there?  Was the new unit considerable more efficient (or significantly better in some other way) than the previous one?

[Carl]

If your 4-plex is residential rental real estate and you replaced the HVAC in one of them, then it doesn't qualify for SEC179.  Since an HVAC would become "a material part of" the property it gets classified as residential rental real estate and depreciated over 27.5 years. Property classified as such does not qualify for SEC179. Additionally, since it cost more than $2,500 it doesn't qualify for safe harbor de-minimus either.

[garyt22]

Thank you for your response.  This is a garden style "4-plex" so there are 4 apartments, each are 2bd, 1 bth.  Each has its own HVAC system so there are a total of 4 HVAC systems.  This was not replaced because it was more efficient, but the other unit was pushing 15 years old so I believe the new unit would be more efficient.  With regard to my original question, if the property is owned by an LLC, does that make it a commercial property? Or, because it is an apartment (clearly residential) how the property is owned is irrelevant when determining if it is a residential or commercial property?  Thank you.

[garyt22]

Thank you for your response.

[AmeliesUncle]

No, the LLC does not change the character of the property.  It is still residential, which does not qualify for Section 179.

However, it MIGHT qualify as a repair/maintenance.  The fact that it is only one out of four (a small portion of the total) would likely qualify it.  However, the fact that the building is four separate units and each HVAC performs only within that unit (making it a large portion of the total in each unit) makes me hesitate to assert if it would qualify. 

If you want to read the legalese, below is the link to the Regulation that I am referring to.  It has SEVERAL examples (at least three pertinent ones) involving HVACs, so be sure to read them all before making your decision (you can hit Control-F on your keyboard and type "HVAC" to search for the 70 occurrences of that word).

https://www.law.cornell.edu/cfr/text/26/1.263(a)-3

[garyt22]

Thank you.  I really appreciate it.