I assume I am correct with everything up to trying to find an option to shorten the recovery period on the HVAC system? (That I can deduct all of the $1,014 expense of the hot water heater in 2015 under the De Minimus Safe Harbor Rule? That the HVAC costs must be depreciated? That the HVAC system becomes part of the real estate itself when installed?) I went ahead, as an experiment, and checked the "Residential Rental Real Estate" box on the second page after I added the HVAC system as an asset and it brings the item in with a 27.5 year recovery period. If I checked the "Appliances, Carpet and Furniture" box, the recovery period is 5 years and I qualify for Special Depreciation of 50% of the value of the asset in the first year. That gives me a bit too much of a deduction (2015 has been a light year income-wise so there is not alot of withheld tax to claw back plus the more I deduct, the closer I push my effective tax rate toward 0% and I am loathe to do that for fear of triggering an audit). I think I do have an option of not utilizing the Special Depreciation and just spreading the $8,200 over five years. But that still leaves the question of whether the HVAC system is correctly an appliance or furniture or really should be depreciated at the same rate as the building to which it has become affixed? Any thoughts?
