Depreciation for HVAC in 2020

[tagteam]

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@cndy_orth wrote:

Each part is under $2500........

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You can use the de minimis safe harbor election.

See https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations#Ad...

[cndy_orth]

Thank you. Yes, the air handler is under $2500. Do you have to  manually file a tax return if you use the de minimus Safe Harbor?

Cindy

[tagteam]

The return can be e-filed.

The statement is not required to be signed and dated.

[dankrall]

So then what is the difference with the Safe Harbor Election for Small Taxpayers?  There is no $2,500 limit.

[DaveF1006]

According to the IRS safe harbor instructions, Section 162 of the Internal Revenue Code (IRC) allows you to deduct all the ordinary and necessary expenses you incur during the taxable year in carrying on your trade or business, including the costs of certain materials, supplies, repairs, and maintenance. Under the Safe Harbor provision, these costs can be expensed if under $2500.

However, section 263(a) of the IRC requires you to capitalize the costs of acquiring, producing, and improving tangible property, regardless of the size or the cost incurred. This would include a HVAC.

Let me know if this answers your question.

@dankrall

[nk18]

commerical roof top cost $15600.00 12/12/2022 installed

[Harrylcnm]

I replaced the air conditioner on my residential rental house for $5,100.  Can I expense this?

[Carl]

No.

1. It costs more than $2,500

2. It became "a material part of" the structure (assuming a central A/C type of unit) and is therefore classified as Residential Rental Real Estate, the same as the structure itself.

It gets capitalized and depreciated over the next 27.5 years.

[user322]

You may want to also look at this if applicable:

Reg. Sec. 1.263(a)-3h, the Safe Harbor for Small Landlords allows real estate investors to deduct all of their repairs and maintenance on a property as long as the property’s unadjusted basis is less than $1MM and the total aggregate cost of the repairs, maintenance, and improvements for that property during the year were less than $10,000 or 2% of the unadjusted basis on the building, whichever is less.

https://www.therealestatecpa.com/the-ultimate-guide-to-tax-planning-for-landlords-and-buy-hold-real-...