For Schedule E assets, a Section 179 deduction is allowed only if you check the commercial property box (property type). This limitation also applies to Section 179 carryovers. You have the option to amend return that created the Sec 179 carryover and take bonus/regular depreciation instead.
See IRS Pub 946 Section 179 Eligible Property for information on the section 179 deduction. "Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business [ie: passive income]), and property that produces royalties, does not qualify."
If you are in the business of rental real estate, you can report this activity on Schedule C. Assets used at least 50% for a trade or business are eligible for Section 179.
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