We replace the furnace in our rental property. Is this a maintenance expense or considered an asset improvement?

Forum|Forum|3 months ago
March 30, 2026
2 replies
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RobertB4444

Level 15

A maintenance expense is a repair. A new furnace improves the value of the property. Think about it - when you're buying a house finding out the furnace is brand new makes the property more attractive. So you should depreciate the furnace as a separate asset alongside the rental property.

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taxmodern

Level 5

I agree with the other reply here that says you'll need to probably depreciate it. And unfortunately, HVAC equipment is depreciated on the same schedule as things like the structure of the property, which is 27.5 years for a long-term rental or 39 years for a short-term rental. That's unfortunate since the equipment doesn't even usually last that long, but that is what it is.

If it's a short-term rental, there is an exception where HVAC equipment can qualify for Section 179 to deduct it all in the current year. A rental with an average stay of 30 days or less for the year qualifies as non-residential for purposes of this part of the tax code, so it qualifies for section 179. That's rarely understood or used for short-term rentals, but it is a valid option if the rental qualifies.

David O