The HAVC should have been listed as a new asset in 2020.
Do you know if you took a Section 179 deduction or bonus depreciation for the HVCA in 2020?
If you did, that is added as prior year depreciation.
For the year the rental is sold, the depreciation for 2021 before the sale needs to first be calculated.
Next, the sale proceeds need to be allocated between the building, land, and HVAC (as well as any other assets added to the rental).
If you have been using TurboTax all along, those numbers would be in your TurboTax program already.
If this is the first year using TurboTax, you will need to enter that information, including the original cost and prior depreciation. List the HVAC under Sale of Property/ Depreciation in the Rental section.
You'll need the cost for that and the prior year depreciation.
Prior year depreciation could include Section 179 Deduction or bonus depreciation if you took that in 2020.
If you have to list the property also, the original cost will need to split between building and land.
Residential buildings can only be depreciated straight-line over 27.5 years.
Land is not depreciated.
Now enter the sale:
Rental Properties and Royalties
Select YES to review
Continue to Rental and Royalty Summary and click EDIT next to the location
Enter any income and expenses you had for 2021
Scroll down to Sale of Property/ Depreciation
Select YES to go asset summary
Here is where the building is listed and where the HVAC should be listed.
Click EDIT to report the sale.
When you sell a business asset, like a rental, the depreciation is first "Recaptured" as ordinary income. Any profit left that is attributed to an increase in value is a Capital Gain.
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