Added a new air conditioner to a rental property

No, air conditioners are classified as improvements and depreciated over the useful life. See link below, Ch. 2, page 5, Table 1-1

https://www.irs.gov/pub/irs-pdf/p527.pdf

If you installed a window air conditioner, for instance, you could deduct the cost under Rental Expenses.

If you installed a central air conditioning system ,however, that is considered a Capital Improvement and would be depreciated for 27.5 years, the same as the rental property itself.

If this is your situation, here's info on how to add an improvement as a Rental Asset. 

Go to Assets/Depreciation from the Rental Summary screen.  

You may have the option to expense certain improvements under the Safe Harbor Election for Small Taxpayers. When you begin the Assets/Depreciation section, TurboTax will ask you about this. If you want to deduct the cost fully this year, answer "yes" to include the this election on your return.

If your improvements don't qualify, or you simply wish to depreciate the cost over 27.5 years, continue through the Depreciation interview to set up a new asset.

More detailed information on rental expenses can be found at https://www.irs.gov/taxtopics/tc414.

If this is a window unit then it's classified as equipment or as an appliance and depreciated over 5 years. Otherwise if it's a central A/C unit then it's classified as residential rental real estate (since it becomes "a material part of" the property) and depreciated over 27.5 years.

I do not know how the below is dealt with on *commercial* rental real estate, as I've not researched it. But I would expect it to be treated exactly the same as is required for *residential* rental real estate.

There is a different kind of A/C system referred to as "ductless". With this type of system a single compressor unit is located outside of the structure. Then individual cooling units are located inside one or more rooms of the house. You only have about a 2" hold in the wall or ceiling for the refrigerant lines to pass through to the compressor located outside. Hence, no air ducts.

These types of units are generally more economical because each inside unit has it's own thermostat and only operates when activated by the thermostat. These ductless setups are treated exactly the same as any other central A/C setup. The ductless units are not portable and do "in fact" become a physical part of the structure. So they classified as residential rental real estate and depreciated over 27.5 years. Take note that this does *not* qualify for the Special Depreciation Allowance either.

As for the SEC179 deduction, residential rental real estate and it's associated assets do not qualify for that at all.

Here https://forum.thetaxbook.com/forum/discussion-forums/main-forum-tax-discussion/25734-heat-pump-dep it says 7 years for replacement HVAC.

Since I'm claiming a new HVAC/furnace system as a depreciable improvement, I'll tack onto this similar question rather than start a new one. My question concerns how to categorize the expense.

In the describe this asset section, I'm assuming that I would select Rental Real Estate Property. From there TT asks be to categorize the asset. Would a new HVAC system by further catergorized as Residential Rental Real Estate, or Appliances, carpet, furniture? The only other option is Land improvements. I'm thinking the first, but I could see it being either of the first two.

Thanks.

I'm still quite confused about how to depreciate an new central AC...

There seems to be different voices for 7 years or 27.5 years depreciation time. However, I found the depreciation could be 100% in one year(if I understand correctly):

"

The 2013 final "repair regulations" added a safe harbor election for building property held by taxpayers whose average annual gross receipts for the three preceding tax years is $10 million or less. Such taxpayers are considered a "qualifying small taxpayer" for purposes of the regulation (Reg. Sec. 1.263(a)-3(h)).

Under the safe harbor, a qualifying small taxpayer may elect to not apply the improvement rules to an eligible building property if the total amount paid during the tax year for repairs, maintenance, improvements, and similar activities performed on the eligible building does not exceed the lesser of $10,000 or 2 percent of the unadjusted basis of the building (Reg. Sec. 1.263(a)-3(h)(1))."

Can anyone comment on this?