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Message
Depreciating AC for Rental House
Posted on 4/12/11 at 10:36 am
Posted on 4/12/11 at 10:36 am
I bought an AC for my rental house last year. I just got back my taxes from my CPA and she depreciated the AC over the life of the house, 27 years.
A few questions:
1. What is the point of depreciating the house?
2. I was hoping to get a large amount of money back from this purchase this year, what is the point of depreciating the AC over 27 years?
3. My CPA told me that if I have to buy a new AC before the first one is fully depreciated I write the first one off. Does this mean I am not going to get my full credit back?
4. For other purchases, i.e. flooring, common repairs, etc. how much do you usually get back when doing your taxes? 25%? Let's say I buy a new lock set for the house for $100, how much would I expect to get back?
Sorry for the questions, I just don't understand tax law. Hopefully someone here can help me.
A few questions:
1. What is the point of depreciating the house?
2. I was hoping to get a large amount of money back from this purchase this year, what is the point of depreciating the AC over 27 years?
3. My CPA told me that if I have to buy a new AC before the first one is fully depreciated I write the first one off. Does this mean I am not going to get my full credit back?
4. For other purchases, i.e. flooring, common repairs, etc. how much do you usually get back when doing your taxes? 25%? Let's say I buy a new lock set for the house for $100, how much would I expect to get back?
Sorry for the questions, I just don't understand tax law. Hopefully someone here can help me.
5
Posted on 4/12/11 at 10:52 am to ManOnDaRun
I'll take a stab here.
1. Same as anything else, it lowers your income and thus your taxes.
2. Full disclosure: I looked this up after writing something else. 179 (immediate depreciation of the entire asset) should have easily covered the AC, but that's explicitly not included under 179, so you are SOL on that. [LINK]
3. I'm not sure about this one, I would expect that there is some depreciation re-capture, so the answer to your question is yes.
4. Go to the website I listed before, they have more details. Flooring and stuff is improvements to real property, so you're not going to get 179 on that either.
1. Same as anything else, it lowers your income and thus your taxes.
2. Full disclosure: I looked this up after writing something else. 179 (immediate depreciation of the entire asset) should have easily covered the AC, but that's explicitly not included under 179, so you are SOL on that. [LINK]
3. I'm not sure about this one, I would expect that there is some depreciation re-capture, so the answer to your question is yes.
4. Go to the website I listed before, they have more details. Flooring and stuff is improvements to real property, so you're not going to get 179 on that either.
Posted on 4/12/11 at 10:54 am to ManOnDaRun
quote:
1. What is the point of depreciating the house?
If you don't, when you go to sell it, the IRS will assume that you have, and will assess the depreciation recapture tax anyway.
So that's a pretty good reason right there.
Posted on 4/12/11 at 12:22 pm to OohPooPahDoo
Im pretty sure ac units do not qualify for 179 deprrciation
Posted on 4/12/11 at 12:30 pm to ManOnDaRun
Are you sure what you thought was an AC system was not really a computer network for your rental house?
Posted on 4/12/11 at 12:51 pm to OohPooPahDoo
Why would they do that?
Posted on 4/12/11 at 2:20 pm to kfizzle85
Recapture is based on depreciation allowed or allowable. Allowed is what you claimed, and allowable is what you could have claimed. You have to recapture the greater of the two.
Posted on 4/12/11 at 2:24 pm to Poodlebrain
Posted on 4/12/11 at 4:36 pm to Poodlebrain
Are a/c's eligible for bonus depreciation? Did he buy it after sept?
Posted on 4/12/11 at 5:10 pm to ManOnDaRun
I also purchased an AC for a rental unit this year. Both the house and the AC are being depreciated over the same time period (27.5 years in my case). I did not get any bonus depreciation on my AC unit either.
All items wear out over time (including houses) and depreciation is simply a means of deducting its cost over its expected useful life. (NOTE: The cost of the land on which the house sits is NEVER depreciated, but improvements to the land (such as a driveway) would be depreciated.
If (OK, when) you replace the AC within 27 years, the remainder of the old unit should come off as a deduction in the year it's replaced.
On repair items (such as a new lock set) it is deducted as an ordinary expense from rental income. The net amount back (after taxes) depends on your tax bracket.
All items wear out over time (including houses) and depreciation is simply a means of deducting its cost over its expected useful life. (NOTE: The cost of the land on which the house sits is NEVER depreciated, but improvements to the land (such as a driveway) would be depreciated.
If (OK, when) you replace the AC within 27 years, the remainder of the old unit should come off as a deduction in the year it's replaced.
On repair items (such as a new lock set) it is deducted as an ordinary expense from rental income. The net amount back (after taxes) depends on your tax bracket.
This post was edited on 4/12/11 at 5:11 pm
Posted on 4/12/11 at 7:28 pm to ManOnDaRun
The AC system is a capital improvement.
If it were an AC repair to the system it would be repairs.
Ide like to know if that happens if the property shows a break even or a loss.
If it were an AC repair to the system it would be repairs.
quote:
My CPA told me that if I have to buy a new AC before the first one is fully depreciated I write the first one off.
Ide like to know if that happens if the property shows a break even or a loss.
Posted on 4/12/11 at 9:12 pm to MoreOrLes
Doesn't 179 have a loss limitation? Or is that bonus?
Posted on 4/12/11 at 11:43 pm to kfizzle85
Pretty sure 179 has a loss limitation
Posted on 4/12/11 at 11:46 pm to Quidam65
A central air conditioner is considered a structural component of the building, and it therefore has the same useful life as the building (for depreciation purposes). Bonus depreciation does not apply, but did your accountant consider Gulf Opportunity Zone bonus depreciation? It applies to rental real estate placed in service up to December 31, 2010.+
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