I am working on a 2015 return. I own a townhouse in MA and rent the property. In 2015, I installed a replacement hot water heater. Cost $1,014. I also installed a new HVAC system which replaced the existing furnace and added central AC for the first time. Cost $8,200. With cost below $2500, I think I can deduct the hot water heater replacement under the De Minimus Safe Harbor rule. Correct? But I think I must depreciate the HVAC work as the cost, at $8,200, while less than $10K is more than 2% of the unadjusted base (of $111,500) of the property. Again, am I correct? If so, I don't think the HVAC is an appliance but became part of the real estate itself when permanently installed. If so, I think I check the box "Residential Rental Real Estate" and use whatever method of depreciation the program applies? This seems to suggest a very long recovery period. Any options for shortening that?
