"Enter the smaller of line 5 or the total taxable income"
For starters, assets classified as residential rental real estate assets do not qualify for SEC179. But may qualify for the Special Depreciation Allowance, which is different.
It is not common for residential rental real estate to show a taxable gain. When you add up the deductible rental expenses of mortgage interest, property taxes and insurance and add that to the standard depreciation you are required to take by law, those four items alone will most likely exceed the total rental income received for the tax year. Add to that the other allowed rental expenses of cleaning, maintenance, repairs, etc., and you're practically guaranteed to have a loss every single year the rental property is in service at 100% business use. Therefore I would fully expect your rental property to show a loss on line 26 of the SCH E, even without taking into account any other allowed deductions. So that means the amount on line 26 is the lesser amount. (Would not surprise me at all if it was a negative number, usually indicated by the number being enclosed in parenthesis.)
