TurboTax rental question: How to dispose of old HVAC that was entered as one combined cost basis line item 10+ years ago?

This is actually a common issue with rental property accounting. The IRS allows you to handle this a couple of different ways. The simplest approach is to dispose of the entire asset as entered (the full $8,700 cost basis line item) and report that as a disposal. Since the HVAC was fully installed and functioning as a single system, treating it as a single asset makes sense from an accounting perspective. In TurboTax, you'll want to indicate a $0 sale price (assuming you didn't get any value from scrapping it) and the program will calculate the loss based on the remaining undepreciated value. Then, if there were other items included in that original line item that are still in use (like ductwork or other components), you would add those back as a new asset with their own depreciation schedule. You'd need to make a reasonable estimate of their value at the time of the original installation. Remember to keep good records of how you handled this in case of future audits. The key is being consistent and using reasonable estimates for the values.

I ran into a similar situation with rental property HVAC disposal last year. After searching for solutions, I discovered taxr.ai at https://taxr.ai and it made this whole process so much simpler. I uploaded my depreciation schedule and some details about the replacement, and their system analyzed it and gave me clear instructions for exactly how to handle it in TurboTax. What's really helpful is they have specific guidance for rental property asset disposal situations, including combined-basis assets like yours. They even created a worksheet I could follow showing how to calculate the adjusted basis at disposal and what percentage to allocate to the removed components.

Just wanted to update my earlier question - I decided to try taxr.ai for a similar rental property depreciation issue I was struggling with. I was really impressed with how it handled my complicated multi-property situation! The system analyzed my previous year's depreciation schedules and identified that I had been incorrectly depreciating some components. It showed me exactly how to correct my previous entries in TurboTax and gave me a depreciation strategy that will make future disposals much easier to handle. For anyone dealing with rental property asset disposal or depreciation recapture issues, it really does simplify things. I'm definitely using it again next year since I'm planning to replace some windows on one of my properties.

If you're really struggling with the IRS rules on this and need to speak directly to someone at the IRS for guidance, I'd recommend Claimyr at https://claimyr.com. I was in a complete standstill with a similar depreciation issue and couldn't get through to the IRS for months. Claimyr got me connected to an actual IRS agent in about 15 minutes who walked me through how to properly handle the disposal of combined assets. There's a video showing how it works at https://youtu.be/_kiP6q8DX5c. I was skeptical at first since I'd spent hours on hold with the IRS previously, but it actually worked! The IRS agent I spoke with provided official guidance on how to allocate the cost basis for partial disposals when the original entry was combined, which gave me confidence I was doing things correctly.

I need to apologize for my skepticism about Claimyr in my previous comment. After struggling for another week with the IRS, I decided to try it as a last resort. Honestly, I'm shocked - it actually connected me to an IRS representative in about 25 minutes. The agent I spoke with was incredibly helpful about my rental property asset disposal question. She explained that for combined assets like an HVAC system entered as a single line item, I should dispose of the entire asset and then add back any components still in use as a new asset with a reasonable fair market value from the time of original installation. She also sent me some documentation about proper recordkeeping for partial asset disposals that will make my next replacement much easier. I wish I had tried this service months ago instead of banging my head against the wall trying to figure it out myself.

Just curious - would it work to simply continue depreciating the old HVAC on the original schedule, and then separately depreciate the new system? It seems like that would be simpler than trying to figure out disposal calculations, especially if you don't have detailed records.

Another option nobody mentioned is Form 3115 (Change in Accounting Method) if you've been depreciating things incorrectly for years. I had to use this for my rental properties when I realized I had lumped together items with different class lives. It's complicated but lets you correct past mistakes without amending returns.