No, they are not wrong. However certain criteria must be met and you may choose to use 'safe harbor' instead which is more clear and allowed for residential rental properties (see below).
Leased property. - Section 179
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. However, you can claim a section 179 deduction for the cost of the following property.
- Property you manufacture or produce and lease to others.
- Property you purchase and lease to others if both the following tests are met.
- The term of the lease (including options to renew) is less than 50% of the property's class life.
- For the first 12 months after the property is transferred to the lessee, the total business deductions you are allowed on the property (other than rents and reimbursed amounts) are more than 15% of the rental income from the property.
Bonus Depreciation:
It depends on how you depreciated these. If you depreciated these assets as Residential Rental Property with a 27.5 straight line deprecation, then these assets are not eligible for the bonus depreciation. Bonus depreciation can only be applied to assets that have a useful life of 20 years or less. Here are some general guidelines to depreciation and expenses regarding residential real estate.
DeMinimis Safe Harbor (DMSH) and Safe Harbor for Small Taxpayers
Either or both safe harbor elections would be entered in the rental activity using Miscellaneous expenses if you choose this method.
- Enter your description and amount
Keep close track of these expenses because they will be used to reduce cost basis at the time of a future sale, thereby increasing gain at that time.
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