SECTION 179 Deduction Nonresidential rental property

[LG501]

I installed a new HVAC unit on a nonresidential rental property. The program calculates the full amount as Section 179 deduction, but it doesn't actually subtract the amount from the total income. How to fix this?

[Mike9241]

The 179 deduction is limited to business income computed without the deduction. If the rental shows a loss before the deduction, the 179 is not allowed but becomes a carryforward until you have business income in that year.

[LG501]

The rental has a net profit.

[LG501]

The rental does have a profit. I think the problem is that I needed to add the new HVAC unit as a new asset to be depreciated. However, the program doesn't associated the rental income of the building, for which this HVAC was purchased, with this new asset. So it looks like there is no income to offset the expense. How to work around this?

[KrisD15]

Is the rental passive income or treated as a trade or business?

Electing Section 179 Deduction for rental assets can be tricky. The rental needs to be considered a trade or business. 

TurboTax does give the option of claiming Section 179 when entering a rental asset, but it may not be allowed depending on how you answer the other questions concerning the rental ("Are you considered a Real Estate Professional").

Please click the "Learn More" link on that screen ("How Do You Want to Deduct this Item") 

26 CFR Sec 1.179-1

"(2) Noncorporate lessor. In determining the class of taxpayers (other than an estate or trust) for which section 179 is applicable, section 179(d)(5) provides that if a taxpayer is a noncorporate lessor (i.e., a person who is not a corporation and is a lessor), the taxpayer shall not be entitled to claim a section 179 expense for section 179 property purchased and leased by the taxpayer unless the taxpayer has satisfied all of the requirements of section 179(d)(5) (A) or (B)."

[LG501]

I understand the complications with Section 179 deductions and rental property. But suppose I am able to take the deduction. I can't figure out how to do it. Turbotax calculates the amount but it doesn't change anything because it's not connecting the dots between the expense and the associated rental income from the building. The explanation given is that the deduction will be allowed in the future when there is rental income to be offset.  But in reality, there is rental income for this building. I opened the form and tried manually adjust it to add the income there, but I can't do it. 

[AnnetteB6]

Be sure that you are editing the rental property where you installed the HVAC before choosing to 'Add an Asset'.  That will automatically tie the rental together with the asset.

@LG501 

[AmeliesUncle]

Does the rental rise to the level of a "Trade or Business"?

Section 179 is only allowed for a "Trade or Business".

TurboTax assumes that all rentals are NOT a "Trade or Business".

IF it is a "Trade or Business", you need to modify line 11 of Form 4592.  As far as I know, the online version of TurboTax can NOT do this; you would need the CD/downloaded version to do that (and go into "Forms Mode" to modify line 11 of Form 4562_.