For a rental property, the correct depreciation period for a furnace is 27.5 years, not 7 years. TurboTax might have selected 7 years due to a misclassification or an error in the asset category.
Here’s why it’s 27.5 years:
- Residential Rental Property: Furnaces are considered part of the residential rental property and are depreciated over 27.5 years using the Modified Accelerated Cost Recovery System (MACRS)
- Component of the Property: Since the furnace is a central unit that becomes a component of the house itself, it follows the same depreciation period as the property
Typically, assets with a useful life of 5 to 7 years include:
- Office equipment (computers, printers, etc.)
- Furniture and fixtures (desks, chairs, etc.)
- Vehicles used for business purposes
To correct this in TurboTax:
- Review Asset Category: Ensure the furnace is categorized under "Residential Rental Real Estate not as equipment/furniture/fixtures
- Review Asset/Depreciation Details: Navigate to the Assets/Depreciation :
- Use the search magnifying glass at the top right and type "depreciation" or "assets purchased." Click the "Jump to" link to go directly to the asset section
