HVAC Drepeciation in Residentila Rental

Forum|Forum|3 years ago
February 20, 2023
2 replies
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Hi,

3 questions regarding my residential rental

1. TT is letting me depreciate my $8900 entire HVAC prior to Jan 1 2023. But the software never gave the option to choose heating and ac as a definition or category. Is this a sec 179 on the minimus?

2. Are the install fees. permits, labor an expense

3.if I choose to depreciate over years the software says that it is a 5 year depreciation? Help??

Thanks in advance,

james

Best answer by AnnetteB6

An item that costs $8900 cannot be deducted under the de minimis rule. The cost must be under $2500 to qualify for that special tax treatment. Also, section 179 treatment is not available for rental properties.

Installation fees, permit costs, and labor for installation are included in the total cost of the HVAC, not just the cost of the HVAC unit itself. You would not deduct those expenses as a separate item on their own.

Depreciation of a new HVAC unit is over 27.5 years, not 5 years. If it is a central unit that becomes a component of the house itself, then it is depreciated over the same time period as the house. You would choose 'Residential Rental Real Estate' as the asset category when entering the information for depreciation.

A

AnnetteB6Answer

Level 15

An item that costs $8900 cannot be deducted under the de minimis rule. The cost must be under $2500 to qualify for that special tax treatment. Also, section 179 treatment is not available for rental properties.

Installation fees, permit costs, and labor for installation are included in the total cost of the HVAC, not just the cost of the HVAC unit itself. You would not deduct those expenses as a separate item on their own.

Depreciation of a new HVAC unit is over 27.5 years, not 5 years. If it is a central unit that becomes a component of the house itself, then it is depreciated over the same time period as the house. You would choose 'Residential Rental Real Estate' as the asset category when entering the information for depreciation.

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P

PenelopeNC

Level 2

Purchased new HVAC for residential rental property. TurboTax isn't showing any depreciation expense for 2023 or 2024. I can calculate it myself using 27.5 year life, but what depreciation method do I use? (SL?) Entity is LLC. Can't take Sec. 179 because there's no business income, even though the company is now profitable.

Carl

Level 11

There will be no depreciation shown on your 2023 taxes, for the 2024 tax year. Only for the 2023 tax year beginning with the date placed in service. Most likely, you're misunderstanding the screens (of which some are not clear) on the information being asked for when you enter the HVAC in the assets/depreciation section.

Classified as residential rental real estate, which as you know is 27.5 years to depreciate

Date placed in service is the date it became operational

Business use percentage is 100%

Cost is what you paid for it, including shipping, installation, and any other expenses related to the HVAC.

Cost of Land is $0.

The program will use the MM/SL convention and depreciation will start from the 15th of whatever month it was placed in service.
Note that the 1st year depreciation will be lower than the years that follow, since it was not in service for all 365 days of the tax year.
TO check the math, see IRS Pub 946 at https://www.irs.gov/pub/irs-pdf/p946.pdf and use the MACRS worksheet on page 36. For line 6 of that worksheet, use table A-6 on page 71.

Carl

Level 11

A new central air unit becomes "a physical part of" the structure. Therefore it's classified under MACRS as Residential Rental Real Estate and get depreciated over 27.5 years. It is not eligible for SEC 179 or SDA. Since it was more than $2,500 it's also not eligible for safe harbor.