HVAC expense for rental property

[taxdrama]

On various TT threads, I am seeing that that a brand new HVAC installed in a rental property becomes part of the property and, hence, the cost (around $7600 that I paid)  has to be depreciated over 27.5 years. After following the prompts for Depreciation section and then onto Rental Real Estate, I reach a screen in TT, where it states that "since this is the first year of business use for this asset, you may deduct its full value this year or spread the deduction over several years." Then, I am given options of:

1. I'll spread the deduction over several years

2. I'll deduct the full value of the item this year (Take the Section 179 deduction)

3. I'll take a partial section 179 deduction this year

My question is: if the cost HAS to be depreciated over 27.5 years, why is TT giving me these options? Can I select Option 2 above? Thanks in advance.

[AnnetteB6]

The answer does depend on your particular situation, but not all rental properties will qualify to use the Section 179 deduction.  Take a look at the following information taken from the Learn More link on the screen where the Section 179 deduction is presented to you:

Deduct the Full Value This Year

Taking the Section 179 deduction allows you to deduct the entire value of the item this year (rather than writing it off over several years).

If your business is showing a profit, claiming the Section 179 deduction might work to your advantage. The additional deduction will reduce your profit this year, which means you will pay less in taxes and keep more money in your pocket. You might prefer that to saving money over a few years to come.

Keep in mind, though, if you take the Section 179 deduction on this item, the IRS says you'll need to continue using the item more than 50% of the time for your business. If business use of the item drops to 50% or less during the life of the item (the number of years you would be depreciating it if you hadn't taken the Section 179 deduction), the IRS will retroactively deny your Section 179 deduction. As a result, you'll be required to recapture the deduction; that is, declare it as taxable income.

Note:

Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify. For example, residential real property may qualify for Section 179 depending on the nature of the trade or business it is used in.

Taking a partial Section 179 deduction

Under Section 179, you can write off less than the full value of the item if you want. Not sure if your income is going to go up, and want to 'hedge your bets'? Take some of the deduction this year using the 179 deduction, and save the remainder to lower your income in future years by depreciating it (writing it off over several years).

If renting property is not your business, it is not advisable to use the Section 179 deduction.