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K
kohirkar
April 9, 2024
Solved

Where to report new HVAC for a rental?

  • April 9, 2024
  • 2 replies
  • 0 views
I replaced a Heat Pump in my rental. I believe that I need to report this as Capital Improvement and not as a repair expense. This is more than $2500.  I don't see a section for "Appliances". The only option in TurboTax seems to be "Major Improvements". And the examples for Major improvements do not include new appliances. Please help.
Best answer by AmeliesUncle

HVAC is considered as part of the actual property itself, not as an "appliance".  It would need to be depreciated over 27.5 years (assuming this is residential rental property in the US).

2 replies

M
maglib
Employee
April 9, 2024

@kohirkar 

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.

Note: Although it doesn't seem logical, refinance fees and mortgage points are also entered in the Assets/Depreciation section. The IRS considers these amortizable intangibles and accounting rules dictate that those are to be depreciated instead of deducted as an expense.

 

You may also qualify to expense the asset in the current year as section 179 deductions:

To qualify for a Section 179 deduction, the asset must be:

  • Tangible (you're able to touch it, which excludes intangible assets like patents or copyrights)
  • Purchased (not leased) for business use
  • Used more than 50% in your business
  • Placed in service (purchased, acquired, or converted to business use) during the current tax year
  • Acquired from a nonrelated party
**I don't work for TT. Just trying to help. All the best. ***Say "Thanks" by marking as BEST ANSWER and clicking the thumb icon in a post and that I solved your question**Mark the post that answers your question by clicking on "Mark as Best Answer" I am NOT an expert and you should confirm with a tax expert.
K
kohirkarAuthor
April 9, 2024

Thank you for responding. This is what I am trying. When I get to the assets section I first get the question is the expense less than $2500, in my case it isn’t. The next screen is asking about “ Major improvements “. I tried using this but it shows a screen that wants me to put in which building I improved. I moved beyond this and then I go to the summary page where I can edit assets.

 

I don’t see a page where I can enter appliances above $2500.

 

thanks

 

 

M
maglib
Employee
April 9, 2024

@kohirkar  scroll down to the bottom of the screen where you can edit assets, there should be an option to add an asset.

The building improvements screen, if you continued through that you probably would have gotten to the right screen to add too as rental appliance.

Let me know if it works. I had no assets myself to enter this year.

**I don't work for TT. Just trying to help. All the best. ***Say "Thanks" by marking as BEST ANSWER and clicking the thumb icon in a post and that I solved your question**Mark the post that answers your question by clicking on "Mark as Best Answer" I am NOT an expert and you should confirm with a tax expert.
A
AmeliesUncleAnswer
April 12, 2024

HVAC is considered as part of the actual property itself, not as an "appliance".  It would need to be depreciated over 27.5 years (assuming this is residential rental property in the US).

    M
    maglib
    Employee
    April 13, 2024

    The CARES Act contains several tax savings benefits for businesses, including specific terms for HVAC and HVAC depreciation life – with the goal of enhancing Indoor Air Quality (IAC).  And Rental properties qualify as a business as we found with 199A

    For example, under Section 168 of the tax code, the cost of all equipment and components of the “heating, ventilating, and air conditioning system” may be fully deducted for tax purposes in the first year. The CARES Act reduces the depreciation schedule to 15 years and creates a bonus depreciation that allows the taxpayer to take a full deduction of certain costs in a single year. The 100% bonus depreciation applies to qualified property acquired and placed in service before January 1, 2023*.

    @AmeliesUncle "The CARES Act permanently reduces the depreciation schedule to 15 years and creates a bonus depreciation that allows the taxpayer to take a full deduction of certain costs in a single year."  

    Tax Cuts and Jobs Act (TCJA), P.L. 115-97, makes HVAC costs eligible for expensing under Sec. 179

     

     

     

     

    **I don't work for TT. Just trying to help. All the best. ***Say "Thanks" by marking as BEST ANSWER and clicking the thumb icon in a post and that I solved your question**Mark the post that answers your question by clicking on "Mark as Best Answer" I am NOT an expert and you should confirm with a tax expert.
    A
    AmeliesUncle
    April 14, 2024

    @maglib  I'm not sure where you are citing that from, but it seem quite out of context.

     

    Yes, HVAC for NON-residential real property qualifies for Section 179, so it can be fully taken in one year.

     

    No, HVAC was NOT directly changed to 15 year property.  That is referring to Qualified Improvement Property, not HVAC.  

     

    Under certain circumstances, Qualified Improvement Property could possibly include HVAC, but that is only for NON-residential real property.

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