Just asked about HVAC & was told it's an improvement. Sold rental property same year we installed new HVAC. won't be able to depreciate multiple yrs. Still improvement?

[JulieH1]

Yes.  

The addition of the HVAC is added to your basis in the rental so you will get the benefit of the full replacement this year since you sold it this year.

Example:

Prior to the HVAC replacement, your basis in your property was $100,000.  You sell it for $200,000 so you pay taxes on the $100,000.

After the HVAC replacement, you add the cost of the replacement to the basis so you have a basis of $104,000 in the property.  You sell it for $200,000 so you only pay taxes on $96,000.

[kbr2]

Is it entered as an asset for the year you bought the HVAC even though the rental home was sold the same year?  What is the basis amount?  The amount of the depreciation or the amount of the purchase price?