HVAC dies at 15 years old - Remaining depreciation

[Charles H.]

Hi all,

I am having difficulties to have the exact answer for my question and I need a quick answer since I need to pay a bill soon!

I purchased a townhome last month and got it rented out within a week. Of course, this week, the compressor died. Supposedly $1800 for the repair. Or I may get a new unit for $4000-ish (waiting for the quote).

The HVAC is original and is 15 years old. I read on different post that the remaining depreciation of the old system could be taken this year.

Is it true ? How is the remaining 12.5 years calculated? Will it be 12.5 x some value = deduction for this year ?

Thank you guys for the help!

[Michael Plaks]

@Charles H.

Why don't you ask the guy you're pictured with? He has an accounting degree and all kinds of wacky theories on taxes :)   Now, having kicked GC, I can answer your question.

1. What happened prior to your purchase does not matter for your taxes. The unit could be 15 years old or 1 week old - the depreciation starts fresh with your purchase. It does not continue from the previous owner like you think it does.

2. What you start depreciating is the unit's current value, not its original cost. After 15 years, its value is probably under $100.

3. You can deduct its value since it is replaced. Well, not really deduct but record a disposition of an asset. Cost segregation is not really required for this one. However, considering the nominal value of the 15-yr unit, it's hardly worth the hassle.