I admit I don’t do my own taxes. Taxes make no sense.
I have a rental house. Say I made 9K in rent last year and bought a 7K HVAC unit. So that’s 2K in profit, right? Nooooo! It’s $5213.34 in profit because the HVAC has to depreciate over n years and get added back to the house as an improvement and the old unit gets rebated for x dollars and yadda yadda…
Dearest accountant. Whatever. Where do I sign?
I have a rental house. Say I made 9K in rent last year and bought a 7K HVAC unit. So that’s 2K in profit, right? Nooooo! It’s $5213.34 in profit because the HVAC has to depreciate over n years and get added back to the house as an improvement and the old unit gets rebated for x dollars and yadda yadda…
Maybe yes, maybe no. It depends on whether the new unit was an improvement or a replacement. Improvement doesn’t necessarily mean it works better than the unit it replaces, but is it an improvement over the old unit when that unit was new. It’s all a matter of facts and circumstances. If an improvement, you need to depreciate over the IRS specified lifetime. If a replacement, it’s a current year deduction.
Ira
Maybe yes, maybe no. It depends on whether the new unit was an improvement or a replacement. Improvement doesn’t necessarily mean it works better than the unit it replaces, but is it an improvement over the old unit when that unit was new. It’s all a matter of facts and circumstances. If an improvement, you need to depreciate over the IRS specified lifetime. If a replacement, it’s a current year deduction.
Can you purchase a replacement for an HVAC system? The standards for HVAC systems have changed over the years. When I purchased an HVAC system for my mother in 2019, there were no HVAC systems being sold that were equivalent to my mother’s existing system that was installed in 1998. The standards had changed. The only option was to replace it with an “improved” system that met today’s standards.
Yeah the old one was 15 years old I don’t think they make ‘em like that anymore. Coolant changed.
Yeah the old one was 15 years old I don’t think they make ‘em like that anymore. Coolant changed.
That doesn’t necessarily make it an improvement. It could still be a repair. You really need to understand the differences between the two units and the IRS rules which are found more in the Tax Court decisions than the IRS publications and instructions.
As you said in the subject line, that’s “why I don’t do taxes.”
Ira
I admit I don’t do my own taxes. Taxes make no sense.
I have a rental house. Say I made 9K in rent last year and bought a 7K HVAC unit. So that’s 2K in profit, right? Nooooo! It’s $5213.34 in profit because the HVAC has to depreciate over n years and get added back to the house as an improvement and the old unit gets rebated for x dollars and yadda yadda…
Dearest accountant. Whatever. Where do I sign?
…Me too…i bought mine in 1982 and still there…
If an improvement, you need to depreciate over the IRS specified lifetime. If a replacement, it’s a current year deduction.
I’ve replaced many things over the years and so far my CPA has said they went as current year deductions. For example, this past year I replaced a refrigerator in the beach condo. Cost $12k which was replacing a fridge that was probably $10k new 20 years ago. In a way surprised me a little because I figured there had to be some money limit to deduct it all at once.
Another reason we use CPAs, we have a very complicated return that involves 4 states.
Tell me where to sign and how much did it cost me.
JLC
I replaced a refrigerator in the beach condo. Cost $12k
Jeez!!! What kind of refrigerator did you buy? The whole Ice House?
I’m better Viking for that kind of money.
My last rental refrigerator cost $900.
I replaced a refrigerator in the beach condo. Cost $12k
Jeez!!! What kind of refrigerator did you buy? The whole Ice House?
Sub-Zero. With a high end rental, high end amenities are expected. The big kicker, had to be cabinet depth because of the current kitchen design so that added a little.
JLC
I’m better Viking for that kind of money.
That is what I replaced. It was probably the original from when the condo was built around 1997 (I bought the condo in 2015). Had 2 issues: one, no longer making replacement parts and two, harder to find people to work on them.
We had Viking stuff in our last personal home but in our new place we went with Miele.
JLC