Why is safe harbor for small taxpayers Section 1.263 showing up on my return?

Forum|Forum|3 years ago
March 30, 2023
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In 2022, I had a new $4,500 HVAC installed on a rental property which I am depreciating over 5 years. For 2022, turbotax calculated the depreciaton expense @ $900. During the question portion of Turbotax, I did not select electing safe harbor as the total HVAC cost was over 2% of the unadjusted basis of the home. But now I see that a small taxpayers Section 1.263 form is included in my return. In another thread, deleting the form was discussed but I'm not sure this is the best recourse. I have gone over the Turbotax questions several times. The only thing different this year is I had an improvement.

Best answer by Anonymous_

@hdham wrote:

In 2022, I had a new $4,500 HVAC installed on a rental property which I am depreciating over 5 years.

Why?

The HVAC exceeds the safe harbor limit and, apparently, the property is residential rental property (e.g., a home). As such, the recovery period for the HVAC you had installed should be 27.5 years, not 5.

Anonymous_Answer

Employee

@hdham wrote:

In 2022, I had a new $4,500 HVAC installed on a rental property which I am depreciating over 5 years.

Why?

hdhamAuthor

I reviewed https://www.irs.gov/publications/p527, specifically Table 2-1 MACRS Recovery Periods for Property used in Rental Activities. HVAC must be depreciated over 27.5 years, not 5. Thank you. I made the changes in Turbotax but the Safe Harbor election is still there. If I leave it as is, will that make any difference?