Section 179 Carryover

[user33]

I purchased blinds last year for rental property. It was reported as section 179 depreciation BUT the depreciation wasn't allowed due to insufficient income. This year, Turbotax shows the 179 depreciation carryover as an error because "it's not commercial property". How do I correct this and finish my report?

[KrisD15]

The Section 179 Deduction is not allowed on an asset that is used for passive rental income. 

According to the IRS:

“To qualify for the section 179 deduction, your property must have been acquired for use in your trade or business. Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify.”

To claim the carryover for a business asset,

Go to the Business Section

• select EDIT for that Business
• Scroll down to "Final Details Carryovers, limitations, summary, at-risk"
• Scroll down to "Special Situations"    START or UPDATE

Select "I have unused section 179 expenses carrying over from 2023" 

Enter the amount on the following screen

There is a "Learn More" link on the screen to elect the 179 Deduction which explains how the deduction may not be allowed. This can be over-ridden the year the asset was placed into service, but will not allow you to carry the unallowed loss to the following year return if the asset is not business related. 

[Edited 3/2/2025 I 11:00am PST]

@user33 

[AmeliesUncle]

Did the rental show a profit last year?  If so, it is likely TurboTax incorrectly denied the deduction last year, so you would not have a carryover to this year (you would need to amend last year's return to claim it).

As a side note, the error message about it not being commercial property is outdated because it is based on law from 2017 and earlier.  The fact it has been allowable for residential property since 2018 doesn't give me much confidence in the reliability of the program.

[user33]

What EXACT form/worksheet are you looking at? Provide the name! I don't have anything ending with the heading "special situations". Plus, all input lines for section 179 state "disallowed" and not "unused". 

[fgdollar]

I have the same issue concerning a refrigerator and a dishwasher.  If what you are saying is true, then TurboTax had a problem in 2023 and it continues in 2024.  In 2023, it told me I had s Section 179 Carryover for the refrigerator and it knew it was for rental property.  It even imported into 2024.  Now 2024 is showing that I have 179 Carryover for both the refrigerator and a dishwasher.  Not until I run the error check does it say anything about 179 carryover being invalid because it is not a commercial property.

[PatriciaV]

TurboTax does not accept entries for Section 179 carryovers on Rental Properties at this time. If you have a carryover from a prior year, you'll need to delete that amount from the subform presented by SmartCheck.

If you're use TurboTax for Desktop, you can see this entry using Forms Mode.

1. Open Schedule E Wks (property address).
2. Scroll down to the Carryovers to 2024 Smart Worksheet.
3. Any amounts or boxes in red indicate errors.
4. Click the Errors icon above "Forms in My Return" to open a message box in the footer of the open form.

@user33 

@fgdollar 

[fgdollar]

I did do that and got past the problem, but TurboTax should fix the problem so that it never appears as a carryover.