Second time replacing a heat-pump in a rental unit, is it still a capital improvement

[trsdos]

I bought a house in 2004 as a primary residence.  This house had no central heat or AC.  I installed ducts and a heat pump, the labor was performed by me.  I did have a qualified HVAC make the hookups for the refrigerant.  I did a number of other improvements ( windows, roof, siding, etc ).  In 2012, I converted it to a rental and as a cost basic I added the cost of the AC and other improvements to the original purchase price.   I had to  replace the heat-pump how does this affect the cost basis since I already added in the other unit that is now gone?  Also is there any sweat equity since I installed it?

EDIT :  Hope I made it more readable

[Hal_Al]

Easy question first, you are not allowed any sweat equity. That is, you should not have included anything, for your labor, when you increased the cost basis in 2004.

Second, you do not need to adjust the cost of your new (I assume 2019)  heat pump. You may set the entire cost up for depreciation or if you qualify (probably not) write it off. See https://ttlc.intuit.com/community/state-taxes/discussion/de-minimis-safe-harbor-election/00/39814?ju...

Third, you may be able to do a partial disposition of the old heat pump (write off the un-depreciated part). That involves retroactively separating the asset from the total cost of the house. See links below for a full discussion.

You may want to consider having your taxes one professionally this year. 

https://www.thebalance.com/partial-dispositions-3192873

https://evergreensmallbusiness.com/partial-dispositions-and-the-new-tangible-property-regulations/

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

[Carl]

Personally, I would leave the original figures alone if you included your property improvements in the total structure price already being depreciated. The cost of the professional help you would need to separate the old heat pump out to deduct the remaining depreciation not yet taken would result in a deduction that would reduce taxable income. But it will result in a tax reduction that is far, far less than what it would cost you for the professional help to do this correctly.  On top of that, since rental property almost "always" operates at a loss on paper tax time, it would have absolutely no impact on your 2019 tax liability what-so-ever. Not one penny.

Then just add the new heat pump as another rental asset that gets depreciated over 27.5 years.

[Hal_Al]

@Carl  has a good point. If you don't claim the partial disposition this year, you won't be losing anything. You get to continue to depreciate the whole basis over the remaining 19 years (27-8=19). So it's only a matter of taking larger deduction now or spreading it out. Either way, you get to (eventually) deduct the same amount.

[Trsdos80]

Thank you , the mo re e I look at this, I should contact a CPA

[DavidD66]

I agree with Hal_Al and Carl - You don't get any sweat equity.  I would add the new heat pump as a property improvement in 2019 and I would leave the original figures alone.  

[Carl]

I should contact a CPA

Why bother? You're going to pay that CPA a minimum of $120 for their time and a guarantee you they will have no problems with taking your money. Then, no matter what they do there will not be one single penny of change to your tax liability, up or down. Just leave the current asset alone, add the new heat pump as a new asset, and press on with life.

[Trsdos80]

I like the zero dollar option.