Rental property expenses

[cbuecher]

This past year I put in new flooring ($5865) and a new HVAC ($4300) in my rental home. Do I have to spread out the depreciation over multiple years, or can I take it all this year? Looking at the Asset section, it looks like I can deduct the full amount this year. Also, can I do both the Section 179 and SDA?

[CesarJ]

Yes. For residential rental property, flooring and HVAC are treated as improvements that must be depreciated over their applicable recovery periods.

Depreciation Period: Flooring and HVAC systems are part of residential rental property improvements and typically depreciated over 27.5 years.

Section 179 Eligibility: Section 179 doesn't usually apply to improvements on residential rental property. It is mainly available for tangible personal property used in a trade or business, not for residential rental real estate improvements.

Special Depreciation Allowance (Bonus Depreciation): This allowance typically doesn't apply to residential rental property improvements like flooring or HVAC.

Therefore, you would generally need to spread depreciation deductions for these improvements over multiple years according to IRS depreciation rules.

[taxmodern]

That's all generally correct, I would just add that some types of flooring can be depreciated over 5 years if it's carpet or removable flooring that isn't considered to be permanently attached to the subfloor (such as floating vinyl plank flooring).  

Also if it's a short-term rental then some of those answers are different.   TurboTax still doesn't handle this well, but any 27.5 year items in a short-term rental have to be depreciated over 39 years instead.  And a short-term rental is eligible for qualified improvement property (QIP), so it can use section 179 for the HVAC system in that case. 

[cbuecher]

Thank you for your replies! This helps!