Furnace depreciation, where to post

12 Replies

I put in a new furnace this year, I known I list it in part III of my 4562, but then do I combine it with the property on my schedule E or does it get its own column? 

The furnace should be able to be depreciated over 5 years as personal property.  20% of the cost is depreciated for the first year.  I cannot speak to which form or schedule. I hope that was helpful.

Originally posted by @Anthony Dooley :

The furnace should be able to be depreciated over 5 years as personal property.  20% of the cost is depreciated for the first year.  I cannot speak to which form or schedule. I hope that was helpful.

 Anthony:

Can you do that in the U.S.A?  Once installed, is it not considered a permanent fixture of the building?

In real estate terms, yes it is a fixture. So is the chandelier.  In tax language, it is personal property.  Personal property are things such as the stove, dishwasher, refrigerator, floor coverings, etc.  the value of these things are depreciated separately from the house and separately from property improvements such as a privacy fence or a barn.  I hope that helps.

@Anthony Dooley  

Interesting ... things do not rollup the same in here.  In Canada, light fixtures, HVAC (heating and air conditioning equipment other than portable units), plumbing, etc. would be considered part of the building and would fall into the same depreciable class (1, 3 or 6) as the building and a depreciated at a rate of 4% (5% for class 3; 10% for class 6). 

Appliances, furniture are consider Class 8 and are depreciated at a rate of 20%.

I only know U.S.A stuff, and I only recently learned that most people claim depreciation incorrectly on their taxes. Land and Improvements is not broken down far enough.  Land isn't depreciated, but improvements can be broken down by the building, personal property, and improvements (separate from the building). For example: A commercial building with a parking lot.  The parking lot adds value to the land (improvement) separately from the building.

@Anthony Dooley  that's called "cost segregation".   I don't know how common it is for small time landlords, but I've heard pitches from gurus offering training and services for doing it.

@Dick M.  

Best to check with a real estate CPA, Amanda Han is one active on BP

Paul

The IRC specifically defines a furnace as a structural component of residential real property and as such is depreciated over 27.5 years. IRS Pub 527, Chapter 2, pg. 9. 

You will use Form 4562 to figure your depreciation, then report the total on your Schedule E.

@Anthony Dooley  @Roy N.  @Dick M.  

Brandon, my question was, on the schedule E, do I add it to the depreciation of the house its in, or does it get its own column as in A, B or C if so what type of property in 1B, single family residence even though its just the furnace?

Originally posted by @Dick M. :

Brandon, my question was, on the schedule E, do I add it to the depreciation of the house its in, or does it get its own column as in A, B or C if so what type of property in 1B, single family residence even though its just the furnace?

It will be totaled in on line 18 (last years line number I haven't looked at this years forms) of your Schedule E column for the property that it is going into.  Also as was mentioned HVAC is a 27.5 year structural component.  Only window AC units or portable heaters would be personal property.

Originally posted by @Anthony Dooley :

The furnace should be able to be depreciated over 5 years as personal property.  20% of the cost is depreciated for the first year.  I cannot speak to which form or schedule. I hope that was helpful.

This quoted post is wrong in more than one way. As others mentioned, a furnace is not a 5 year write off. The other thing that is wrong is that even if it were 5 year property, the first year write off is based on the month placed in service, so unless it were in service in January, it won't get that full 20% in the first year. 

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