What is the MACRS class life for a new air conditioner installed in residential rental property?
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To determine the MACRS class life for a new air conditioner installed in residential rental property, we must first classify the asset under the MACRS rules and then identify the appropriate class life.
1. Classification of the Air Conditioner in Residential Rental Property
- Under MACRS, the classification of property is based on whether the asset is considered part of the building (a structural component) or tangible personal property.
- The IRS Cost Segregation Audit Technique Guide, as well as IRS Publications 527 and 946, and the industry matrices, consistently treat central heating, ventilating, and air conditioning (HVAC) systems as structural components of a building when installed in residential rental property. These are not considered tangible personal property unless they are separate units installed solely to meet the requirements of specific machinery, which is not the case in typical residential rental property installations.
- Therefore, a new air conditioner (as part of the central HVAC system) is classified as a structural component of the residential rental building, and thus is depreciated as part of the residential rental property itself.
2. MACRS Class Life for Residential Rental Property and Its Structural Components
- Under IRC § 168(e)(2)(A), "residential rental property" is defined as any building or structure if 80% or more of the gross rental income is from dwelling units. The HVAC system, as a structural component, is included in this classification.
- The applicable recovery period for residential rental property under the General Depreciation System (GDS) is 27.5 years, and under the Alternative Depreciation System (ADS) is 30 years (for property placed in service after December 31, 2017).
- The "class life" for residential rental property is not specifically listed in the class life tables because it is set by statute, but for structural components, the class life is the same as the building to which they are attached.
3. MACRS Class Life for Air Conditioner as a Separate Asset
- If the air conditioner is a window unit or a portable unit, it may be considered tangible personal property, which would fall under 5-year property (Asset Class 57.0, Distributive Trades and Services, or Asset Class 00.11, Office Furniture, Fixtures, and Equipment), with a class life of 9 years (for appliances) or 10 years (for office equipment), but this is not the case for a central air conditioner installed as part of the building's HVAC system.
4. Conclusion
- For a new air conditioner installed as part of the central HVAC system in residential rental property, the MACRS class life is 27.5 years under the General Depreciation System (GDS), matching the recovery period for residential rental property.
5. Summary Table
Thus, the MACRS class life for a new air conditioner installed as part of the central HVAC system in residential rental property is 27.5 years.
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