Obviously when you purchased the HVAC unit and had it installed, you elected to depreciate it over a 5 or 7 year life span. Understand that depreciation is not a permanent deduction and never had been, unless the asset being depreciated is disposed of with no gain, usually because the asset no longer meets or performs it's designed and intended function.
When you sell a depreciable asset, you are required to recapture any and all depreciation already taken on that asset and pay taxes on that recaptured depreciation in the year of the sale. As stated above, recaptured depreciation is taxable anywhere from 0% to a maximum of 25%. Additionally, recaptured depreciation is added to your AGI and can have the potential to bump you into the next higher tax bracket. But the recaptured depreciation itself will not be taxed above the 25% maximum currently set by law.
