expense or capitalize

[linjmur]

for a rental house: I purchased a new (replacement) HVAC system for $6500.  This is more than 2% of the cost of the building.  Do I have to capitalize the $6500, and if yes how many years is the useful life?

thank you

[HelenC12]

Yes, you should capitalize/depreciate the $6,500 HVAC.  Depreciate it over 27.5 years. 

• Capital improvements that add to the value of your rental property, prolong its life, or adapt it to new uses must be depreciated over a period of time rather than deducted as a current-year expense. 

To enter your rental improvements, simply follow the directions to enter your rental income and expenses. At some point you'll come across the Rental Summary screen. Select Start next to Asset/Depreciation and follow the onscreen instructions. We'll figure out which depreciation method works best in your favor.