HVAC and DPAD

[rjholmes]

Does installation of new heating and air condition units on buildings qualify for DPAD if all other qualifications are met? I always thought so, but a new client has never taken the deduction and I wanted to be sure. From everything I read I believe he would qualify.

[Snaggletooth]

Contractor

Holmes, no one is responding so I will open my big mouth and probably reveal my ignorance.

I believe the DPAD is something the contractor would be entitled to, not the owner.

There have to be W-2 wages expended in the production of the unit, and unless the owner is having his own
people do the work, I don't see how the owner could qualify. Also, something called "margin" is referred to,
which is something the contractor would encounter under a job cost accounting method. Since the owner is
not "selling" the unit, he cannot himself have any margin.

The contractor (is he your client?) would be entitled to the DPAD assuming he can jump through the
hoops on the DPAD calculation.

[rjholmes]

Thanks, Snaggletooth. I need to make my post a little clearer. My client is in the HVAC business. He sells, installs and services new units, both residential and commercial. My thinking is that the sale and installation on new or substantially renovated buildings would qualify. He keeps good books and can easily tell me how much he has in sales and expenses for the installation of the new units, as opposed to servicing the units, which would not be included. TTB has an example of hardwood floor installation qualifying, and from everything I have read I believe my client would qualify. He has a positive QPAI, a positive AGI and w-2 wages.

[Snaggletooth]

You've got a winner!

So your client IS the contractor!! That changes the complexion.

I think this taxpayer can use the DPAD on several different jobs. An easy way to gather the information to calculate
the DPAD is to get the contractor to use a good job-cost accounting system. That way you can separate the jobs that
qualify from those which do not - then you can accumulate the deduction based on the job-cost ledgers.

You've got a winner, my fellow Tennesseean!!

[rjholmes]

Sounds good. Thanks!