Air conditioner for rental property is now deductible under cat 179. If there are losses on these properties because of it, does it make sense to only do a partial 179?

[PaulR1]

I read on several tax blogs that air conditioners are now acceptable for section 179 deductions.  I own 5 rentals but even with property managers I have had to deal directly and pay these AC services, for 2 central AC units this year. But if I take 100% under 179, these will have a loss and I am not sure if I should do a partial 179 for both since I don't know what happens to the excess loss.  I don't understand how bonus depreciation fits into this and how it is different.  I own the properties but have no LLC or corp or anything, so I assume that means I am a sole proprietor and qualify?

[JulieR]

Yes. You can elect to take a Section 179 expense deduction on all or part of an asset and depreciate the rest.  Also, as one who owns rentals, you are not considered a sole proprietor unless you actually operate a company in the business of renting properties.

[PaulR1]

Thanks for the answer Julie.  I have 5 rental properties, but have not incorporated or anything. What exactly qualifies as sole proprietor though?  I thought that mean making decisions on the properties, like I do.  And how to do the depreciation of the rest?  What depreciation schedule? ex 5 yrs etc?   What happens if I depreciate the whole thing instead?  Doesn't it carry forward to next year anyway?

[md4031]

I have 2 rental properties. I paid 9k to replace an AC Condenser and replace all the duct work.  What exactly are my options to write this off?

What are the options? 

[AmyC]

HVAC is considered part of the house and depreciated over the life of the house. Enter it as another asset, just like the house.

You want to reply that this is just a part of the AC and just a repair. It sounds like you are restoring the system to use from what you described.

This is section 162 and does not qualify for bonus depreciation under sec 168.

The IRS has issued Tangible Property Regulations - Frequently Asked Questions which states in step 2:

A unit of tangible property is improved only if the amounts paid are:

• For a betterment to the unit of property; or
• To restore the unit of property; or
• To adapt the unit of property to a new or different use.

Pub 527 for Rental Property states:

Repairs and Improvements 

Generally, an expense for repairing or maintaining your rental property may be deducted if you aren’t required to capitalize the expense. 

Improvements. You must capitalize any expense you pay to improve your rental property. An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Table 1-1 shows examples of many improvements

The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property.

These do not qualify for safe harbor.

@md4031

[md4031]

My condos air condensor died and the ducts were in bad shape and had to be replaced.

So in simple terms can I write off the expense of 8-9k? What are my options?

All the legal talk is not clear to me\.

[DaveF1006]

To clarify, is your condo a rental property or your own personal residence?

@md4031 

[md4031]

My condo is a rental property. I have rented it for over 2 years. 

Last year around September My tenant said the air conditioning went out. A vendor went out to assess it and said the air condenser needs to be replaced and the ductwork in the attic had to be replaced. It cost me about 8 or $9,000.

I am simply wondering if I can deduct that off my taxes.

While I was trying to do my taxes it was confusing because it made it seem like if I do deduct the cost then I cannot use it for depreciation. Whatever it was talking about really confused me.

Can anyone help me understand simply the two options I have?

[DaveF1006]

You would need to depreciate your HVAC for 27.5 years since it is part of your rental real estate unit. You would need to set it up as an asset to be depreciated in your rental property section.

It is not eligible for a 179 deduction since it is part of a rental unit so it does need to be depreciated over 27.5 years.