Investors & landlords

You may be able to take a current deduction for all or a part of the cost of the roof and HVAC. The IRS recently expanded the types of property that qualify for the Section 179 deduction to include both roof and HVAC improvements. There are some limitations on how much Section 179 expense can be taken. For example, the Section 179 deduction is limited to your rental taxable income (it can not create a loss or increase your loss). Any amount in excess of your rental income would roll forward to the next year.

Please see Publication 946 for detailed information on depreciation, including the Section 179 deduction. Some excerpts from this publication that apply to your situation are as follows:

You can elect to treat certain qualified real property you placed in service during the tax year as section 179 property. If this election is made, the term "section 179 property" will include any qualified real property that is:

• Qualified improvement property as described in section 168(e)(6) of the Internal Revenue Code, and

• Any of the following improvements to nonresidential real property placed in service after the date the nonresidential real property was first placed in service.

  1. Roofs.

  2. Heating, ventilation, and air-conditioning property.

  3. Fire protection and alarm systems.

  4. Security systems.

You can carry over to 2019 a 2018 deduction attributable to qualified section 179 real property that you placed in service during the tax year and that you elected to expense but were unable to take because of the business income limitation.