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Marvin,EA, Enrolled Agent
Category: Tax
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Experience: 10 years self employed , Income Tax Preparation & Representation
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depreciation air conditioner

Customer Question

depreciation air conditioner

Submitted: 5 years ago.
Category: Tax
Customer: replied 5 years ago.


Little Rock, Arkansas


Already Tried:
I have a number of rental properties. This year I have had to replace the complete HVAC in two of them this year. The houses both had HVAC to start with, so does this count as a repair or a capital expense to be depreciated?

And if this has to be depreciated, what schedules are available? Adding to the property basis does not make sense; the life expectancy of a HVAC system is only 10 years.

Thanks!

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Expert:  Marvin,EA replied 5 years ago.

Hello and thank you for using Just Answer. What type of an air conditioner do you want to depreciate?

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Customer: replied 5 years ago.

This is a Rheem central heat/aid conditioning package unit, not a window unit.

 

Thanks!

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Expert:  Marvin,EA replied 5 years ago.

I am sorry but the air conditioning unit is a improvement to the rental property and must be capitalized. The air conditioning units must be depreciate with the same recovery period as that of the rental properties to which the improvements are made. If you have 10 years left to depreciate the rental properties the air conditioning units will have the depreciate time of 10 years. You can read more about rental depreciation at www.irs.gov/pub/irs-pdf/p527.pdf on pages 3 and 11.

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Customer: replied 5 years ago.

I am not understanding... how is this an "improvement" when it is replacing an existing (but now broken) unit?

Expert:  Marvin,EA replied 5 years ago.

The depreciation for any additions or improvement is determined in the same manner as the depreciation deduction for the rental unit would be determined if the rental property were placed in service at the same time as the additions and improvements. Replacing the existing air conditioning units are improvement according to the IRS.

Marvin,EA, Enrolled Agent
Category: Tax
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Customer: replied 5 years ago.

Thanks!

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