Thank you for the reply.
Please note that IRS instructions for 2022 Form 4562 include Worksheet 1. Worksheet for Lines 1, 3 and 3 (in part copied below) which provide for the calculation of the Line 1 entry for 4562. As you can see, Line 1 of 4562 can never properly be $1,080,000 unless the total cost of the Section 179 property equals or exceeds $1,080,000. In my case that is not even remotely the situation, and why TT is auto-filling that number instead maybe should be a cause for concern on TT's part.
The issue of whether Sec 179 may apply to property placed into service in the business of renting residential property may, as you suggest, be the cause of TT's conclusion that the deduction is limited to zero. -- although I don't see any reason under Sec 179 why commercial rentals would qualify but residential ones do not. I note, however, that the TT interview regarding this situation offers the Sec 179 deduction, I did not seek it. It was offered only after my selection of answers indicating that the income being entered was from the rental of multi-dwelling residential properties. I found that it made no difference in TT's behavior on this calculation whether I selected passive or active participation. At several further points during completion of the rental section it continues to be offered as an alternative to depreciation with advice that it is a better option where current taxable income will result. If your advice is correct on this point, then every taxpayer clearly entering residential rental income is being led thru this entire Sec 179 election process for no reason, and learning only after completion of the entirety of the deductions section that their 179 deduction has been limited to zero without explanation, and they now have to reallocate all of it with little guidance. From a design perspective, I think TT can do better.
Worksheet 1.
Maximum section 179 limitation calculation. |
1.* | Enter total cost of section 179 property (including qualified section 179 real property) placed in service during the tax year beginning in 2022 | |
2. | The maximum section 179 deduction limitation for 2022 | $1,080,000 |
3. | Enter the smaller of line 1 or line 2 here | |
4. | Enter the amount from line 3 here and on Form 4562, line 1 | |
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