Section 179 Deduction

[robertlstevens]

I built a shop in 2019 for the storage and maintenance of my landscape equipment used in my business.  The cost of construction was $51k.  I entered this asset into turbo tax as an asset, classified the asset as real estate property, then entered the asset as nonresidential real estate, purchased asset new.  Turbo tax then gave me the option of using section 179 deduction to expense the entire cost of the construction expense of $51k.  I was surprised that the construction cost of building a shop could be deducted in full using section 179.  I was expecting to have to depreciate over 39 years.

[DaveF1006]

Yes, this is the first time i have heard of it too. I have researched this IRS link and found some interesting information. If you select the link, look in page 15. Here are the requirements listed in the link.

To qualify for the section 179 deduction, your property must meet all the following requirements. • It must be eligible property.

• It must be acquired for business use.

• It must have been acquired by purchase.

• It must not be property described later under What Property Does Not Qualify.  Here is a summary on what property does not qualify.

1. Land and Improvements Land and land improvements do not qualify as section 179 property. Land improvements include swimming pools, paved parking areas, wharves, docks, bridges, and fences.
2. Excepted Property Even if the requirements explained earlier under What Property Qualifies are met, you cannot elect the section 179 deduction for the following property.
3.  Certain property you lease to others (if you are a noncorporate lessor).
4. Property used predominantly outside the United States, except property described in section 168(g)(4) of the Internal Revenue Code.
5. Property used by certain tax-exempt organizations, except property used in connection with the production of income subject to the tax on unrelated trade or business income.
6. Property used by governmental units or foreign persons or entities, except property used under a lease with a term of less than 6 months. Leased property. Generally, you cannot claim a section 179 deduction based on the cost of property you lease to someone else. This rule does not apply to corporations.  

Hopefully, this gives you an idea that you can take 179 deduction on commercial property under certain conditions. Read publication 946 as it is quite informative.

[Carl]

Assuming the building is an asset for your SCH C business, you must have done something wrong. I just ran a test scenario in TurboTax Home &  Business and was not afforded the SEC179 deduction, since most real estate doesn't qualify for it.

In Business Assets:

Select Add an Asset

Select Real Estate Property and gave it a purchase date of 1/1/2019.

Select Non-Residential Real Estate and continue.

For description I just enter "Storage Building", for cost I entered $51,000 and for cost of land, $16,000. For date purchased, I entered the same as above, 1/1/2019.

Selected "purchased new" and "used 100% for business", gave it an in service date of 1/1/2019.

First year depreciation on that was figured by the program at $860. At no time was I offered a SEC179 deduction, and I should not be offered that on a real estate asset of this specific type.