Heat pump dep

[TAX4US]

Can I use a 10 year life on a replaced heat pump(old one blew up in this cold weather) since warranty only covers 10 years used in a residential rental. I did find a class life of 10 years in an article that said in essence since it was included in the energy rules for credits it was possible to have a class life of 5 years. what is your take on this. bty old one was 8 years old.

[taxea]

I would take 10 years since that is the warranty expected life

[CVTax]

What energy rules? Is this a geothermal unit? Expected life is 12 - 15 for a regular heat pump and should be depreciated 27.5 years-same as the residential rental property.

[TXEA]

27.5 years depreciation - it makes no difference how long something is under warranty or expected to last.

[taxmom34]

agree with TXEA, you posted what I intended to say.

[Roland Slugg]

Can I use a 10 year life on a replaced heat pump ... used in a residential rental?

No. There is a fairly large group of assets that has no specific assigned class life. They are referred to by the IRS as "Personal Property With No Class Life," and they are assigned a recovery period of 7-years under GDS (MACRS) or 12-years under ADS. Replacement HVAC units, furnaces (including heat pumps), a/c units and water heaters are among the most common of these. (Code §168(e)(3)(C)(v))

When the same equipment is included in the purchase of residential rental property or non-residential real property, it is automatically included in the 27.5-year or 39-year life assigned to the entire building, unless it is broken out and depreciated as a component, which is allowed. Replacement units, however, should always be depreciated over 7 (or ADS's 12) years.

You may wish to refer to IRS Pub 946, "How To Depreciate Property," where you will find the above information near the very end, right above the glossary.

[TXEA]

No. There is a fairly large group of assets that has no specific assigned class life. They are referred to by the IRS as "Personal Property With No Class Life," and they are assigned a recovery period of 7-years under GDS (MACRS) or 12-years under ADS. Replacement HVAC units, furnaces (including heat pumps), a/c units and water heaters are among the most common of these. (Code §168(e)(3)(C)(v))

When the same equipment is included in the purchase of residential rental property or non-residential real property, it is automatically included in the 27.5-year or 39-year life assigned to the entire building, unless it is broken out and depreciated as a component, which is allowed. Replacement units, however, should always be depreciated over 7 (or ADS's 12) years.

You may wish to refer to IRS Pub 946, "How To Depreciate Property," where you will find the above information near the very end, right above the glossary.

I respectfully disagree. The HVAC is a building system and all building systems are depreciable over the life of the underlying building (27.5 years for residential rental). Here are the building systems:

Heating, ventilation, and air conditioning (HVAC) systems; Plumbing systems; Electrical systems; All escalators; All elevators; Fire-protection and alarm systems; Security systems; Gas distribution systems; and Other structural components that are specifically designated as building systems in future published guidance (Reg. §1.263(a)-3(e)(2)(ii)).

This is the rule under the tangible property regulations and it has always been the rule. There is no basis for taking a 7 year write off for an HVAC now or ever. The 7 year catch all is not meant for any improvement permanently attached to a building.

[Roland Slugg]

No problem. When your clients replace their rental properties' heating and a/c units with new ones, you depreciate those units over 27½ years, but when my clients replace their rental properties' heating and a/c units with new ones, I will use a 7-year MACRS life on their returns.