New A/C System/Not a window unit

[CJC1]

I purchased a new whole house AC system for my rental (not a window unit) at a cost of $3500.  I know it needs to be capitalized and depreciated.  I am at the Asset/Depreciation part in Turbo Tax.  There is no option for AC system.  I can click 'other' but it asks questions that don't really seem to apply like "have you used this item 100% for this business..'  To me, it's a rental, not a business. 

I have 3 questions:

1) Is the Asset/Depreciation part in Turbo Tax the correct area to add an asset for depreciation?

2) For the depreciation method, do i use straight line or ADS? 

3)  Why does Turbo Tax ask if i want to depreciate over time or deduct the full value this year?  If i am able to deduce the full value this year, then why add as an asset and not just show as an expense? Deducting the full value makes sense since i have a tax liability.   

Thank you!

[Anonymous_]

You are in the correct section to add the A/C system, but you need to select Rental Real Estate Property and then select Residential Rental Real Estate; that will result in the system being depreciated over 27.5 years on straight-line.

However, note the following details regarding an annual election for improvements, which is from the guidance in TurboTax.

This election is an option you can take each year that lets you write off some building improvements as expenses instead of assets. Expenses typically reduce your income by a larger amount than depreciating an asset over multiple years does. This means you could get a bigger refund.

Here are the rules you need to meet to take this election:
- Your gross receipts, including all your other income, are $10,000,000 or less.
- Your eligible building has an unadjusted basis of $1,000,000 or less.
- The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits:
- 2% of the unadjusted basis of your building or
- $10,000

This election for building improvements is called the Safe Harbor Election for Small Taxpayers. If you decide to take this option, a form called Safe Harbor Election for Small Taxpayers will show up in your tax return. This election will apply to all your businesses, rental properties or farms.