HVAC systems, rental and services (2024)

FAQs

Can you write off an HVAC system for a rental? ›

You will want to report them as rental assets when filing your tax return. If your rental property is not residential, these improvements may qualify for Section 179, which would allow you to deduct the full cost on your 2023 return and not need to depreciate it over many years.

Portable AC Unit

This type of system is typically the most affordable, and even with professional installation, they are budget-friendly. The cost of a portable AC unit can range from $100 to $500 on average, depending on the brand and features.

Depending on where you live, some part of the HVAC acronym no doubt applies to you and your rental property. HVAC refers to heating, ventilation, and air conditioning — all separate systems that make up the climate of your home, and they have to be in proper working order for your tenants.

Installation fees, permit costs, and labor for installation are included in the total cost of the HVAC, not just the cost of the HVAC unit itself. You would not deduct those expenses as a separate item on their own. Depreciation of a new HVAC unit is over 27.5 years, not 5 years.

It also depends on whether you use the HVAC for residential or commercial use. For example, the average life of an air conditioner as part of an HVAC system is typically 27.5 years. If you have a commercial real estate HVAC system, the tax life increases to 39 years.

The overhead costs for HVAC technicians is fairly significant. They don't stay in one place—their days are spent traveling throughout the service area to visit numerous job sites, which means that fuel costs can add up. Effective maintenance and repair also involves additional tools and supplies to complete the job.

The compressor is the most expensive component to replace in an AC unit, and it can cost up to $4,000. It's expensive for two major reasons. First, it's responsible for circulating the refrigerant between the evaporator and condenser coils. Secondly, it's a highly complex equipment with intricate details.

HVAC prices are rising throughout the US because of parts shortages. Parts shortages are because of global shutdowns and other issues. Those issues make manufacturing and shipping parts difficult, slow, and expensive. Homeowners should expect higher prices and delays on replacement parts.

AC stands for air conditioning, which is the process of cooling and dehumidifying the air in a room or building. An HVAC system, on the other hand, stands for heating, ventilation, and air conditioning. It combines the AC with other systems to provide a more comprehensive climate control solution.

The air ducts in some older buildings connect the bathrooms of different apartments in such a way that air can flow directly from one home to the other.

Are HVAC systems tax deductible? ›

If you added an energy-efficient water heater, furnace, boiler, or central air conditioner to your home in 2023, you can claim a deduction in 2024 valued at $1,200. That sum is a total of all the HVAC, so whether you purchase one new system or several, you're still capped at the same value.

The main IRS rules for claiming bonus depreciation are: A qualified non-residential property such as retail centers, hospitals, hotels, and motels. Qualifying improvements to the property, such as replacing HVAC, flooring, plumbing, or lighting. Assets placed in service during the eligible timeframe.

Technically, it can be both equipment and a building improvement. HVAC systems like a heat pump, air conditioner, or furnace are pure definitions of equipment. In this case, they're heating and cooling equipment. They also match the definitions for building improvements.

Do HVAC units qualify for Section 179? In short, yes; HVAC units qualify for a Section 179 reduction per tax code. In December 2017, Congress passed major tax reform, known as the Tax Cuts and Jobs Act (TCJA), which went into effect on Jan.