Discussion:Depreciation of heat and air units

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Discussion Forum Index --> Tax Questions --> Depreciation of heat and air units


Dsmith53 (talk|edits) said:

6 January 2007
How do you depreciate a central heat and air unit placed in a building. 27.5/39 for residential/commercial or 5/7 years depending on type of business. I've always thought a replacement central heat & air unit (where all the duct work, sheetmetal work, etc. had been done when the building was built) was a structural component of the building but I've found out that many of my colleagues have been depreciating the units over a much short time frame.

Deback (talk|edits) said:

January 6, 2007
See Publication 946, page 106, under the definition of Structural Components. Depreciate over 27.5 or 39 years, as you stated above.

Michaelstar (talk|edits) said:

6 January 2007
That does not make it right. Deback is correct. If it is a residential rental - 27.5. Commercial - 39 years. One does not take that kind of item with them when they move.

Solomon (talk|edits) said:

6 January 2007
The examples in the publication are based upon Reg. 1.48-1(e).

Dsmith53 (talk|edits) said:

7 January 2007
I didn't plan on changing my method unless I was wrong. I thought maybe I was missing something. My understanding is that the definition of heat and air systems include all components of the system, including the unit that sits outside or inside the building, etc. and that they become part of the building itself and have to be depreciated for 27.5/39 years. Then, what do you do when the unit has to be replaced in 15 years: write off the remaining basis of the old unit as worthless?

Also, what do you think the answer is if the system is installed by the lessee in a leased building. Would that qualify for the leasehold improvement exception which allows a shorter depreciation. I read an earlier discussion about this and wondered if you agreed that H&A systems would be included as 15 year property?

Thanks for your comments.

Michaelstar (talk|edits) said:

7 January 2007
Dsmith, if you replace the unit at 15 years, yes the balance not yet depreciated would be written off in the year it was replaced. If the asset was installed by the leasee, it would be a 15 year asset for Federal tax depreciation under current law as a leasehold improvement. You would need to confirm if the state you are in has conformed to Federal law - CA has not so that l/h improvement would be depreciated for 39 years for CA state tax for commercial r/e.

Dennis (talk|edits) said:

7 January 2007
(2) The term “structural components” includes such parts of a building as walls, partitions, floors, and ceilings, as well as any permanent coverings therefor such as paneling or tiling; windows and doors; all components (whether in, on, or adjacent to the building) of a central air conditioning or heating system, including motors, compressors, pipes and ducts; Reg. 1.48-1(e)(2)

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