100% bonus depreciation question

6 Replies

Can I claim 100% bonus depreciation for tax year 2018 on a new air conditioner for a residential rental property?

Nope. An air conditioner is necessary for the general operation and maintenance of the building since it provides human comfort, making it real property. You'll have to depreciate it over 27.5 years. What you can do is fully expense any remaining depreciation on the old air conditioner that was removed, and since that's a retired asset there's no recapture. 

There are a lot of things bonus depreciation does apply to, but not an A/C unit in a rental. If it was nonresidential you'd be able to use section 179 to get the same result. 

I'm not a CPA, but I do know the depreciation rules.

Install will be a whole new HVAC system with new ducts etc...

I am upgrading from a window air conditioning unit. Does that change anything?

I'm sure it'll be much nicer in there, but no that doesn't change anything. 

There is a $2500 limit ...you’re Referring to the 2016 de minimis safe harbor election taxpayers can take for the improvement of existing property that otherwise must be depreciated? Look it up.

The following is a quote from the instructions for irs form 4562.

Special rules for qualified section 179 real property. You can elect to treat certain qualified real property placed in service during the tax year as section 179 property. See Election for certain qualified section 179 real property in Part I for information on how to make this election. If the election is made, the term "section 179 property" will include any qualified real property which is: • Qualified improvement property as described in section 168(e)(6), and • Any of the following improvements to nonresidential real property placed in service after the date the nonresidential real property was first placed in service. 1. Roofs. 2. Heating, ventilation, and air-conditioning property. 3. Fire protection and alarm systems. 4. Security systems. This property is considered "qualified section 179 real property." 

Originally posted by @Michael Saberniak :

The following is a quote from the instructions for irs form 4562.

Special rules for qualified section 179 real property. You can elect to treat certain qualified real property placed in service during the tax year as section 179 property. See Election for certain qualified section 179 real property in Part I for information on how to make this election. If the election is made, the term "section 179 property" will include any qualified real property which is: • Qualified improvement property as described in section 168(e)(6), and • Any of the following improvements to nonresidential real property placed in service after the date the nonresidential real property was first placed in service. 1. Roofs. 2. Heating, ventilation, and air-conditioning property. 3. Fire protection and alarm systems. 4. Security systems. This property is considered "qualified section 179 real property." 

"Any of the following improvements to nonresidential real property"

This only applies to business assets. Not residential rentals. Per your quote. 

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