For mortgage points Turbox Tax is complaining On Schedule E worksheet that Only Tangible personal property is eligible for the Section 179 deduction.

[sdarora]

I I bought new rental propoerty in 2023 and paid points to reduce interest rate.

I added this under Assets under Improvements, furnishings, and other assets as per TT suggestion that for mortgage refinance fees report it as  Add an Asset and under that there are 2 entries. 1 for New rental property and second row as Mortgage Points. 

Now Turbotax is complaing that on Schedule E - Eligible Sec 179 property should not be checked Yes. Only Tangible personal property is eligible for the Section 179 deduction. I am confused which option to check.

This is what TT shows when doing the final review:

Check This Entry

Schedule E Worksheet  -- Asset Entry Worksheet (Mortgage Loan Points): Eligible Sec 179 property should not be checked YES. Only tangible personal property is eligible for the Section 179 deduction. (But I am not setting this as Yes, TT fills the form Schedule E, not me.)

(Then it shows 3 options to choose from)

Option 1: No entry Option 2: Eligible Sec 179, Yes (this is selected by default but I am confused because of the above message - Only tangible personal property is eligible for the Section 179 deduction) Option 3: Eligible Sec 179, No

Do I leave Option 2 as selected and continue but what about the message - Only tangible personal property is eligible for the Section 179 deduction - because mortage points are supposed to be reported as Intagible according to TT.

"Points are entered in the same area of interview where you track the depreciation of your rental property, or rental furnishings. You need to go to the Asset/Depreciation topic and enter your loan fees. They are categorized by the IRS as an "Amortizable Intangible". You will enter code section 163: Loan Fees as the method to amortize these expenses."

[PatriciaV]

You are correct that Mortgage Loan Fees are intangible assets. Go back to the Asset/Depreciation topic, delete the second asset entry you made, and re-enter the loan fees in the correct category. 

Mortgage points are categorized by the IRS as an "Amortizable Intangible". You will enter code section 163: Loan Fees as the method to amortize these expenses. These fees are spread over the life of the mortgage (ex: 30 years). You will not see the option to choose Sec 179 in this section.

[sdarora]

@PatriciaV  I am stuck on this last thing to finish my taxes. I can use your help.

You said, "You will not see the option to choose Sec 179 in this section."

I am not selecting Sec 179 option. I did exactly you said. And I selected code section 163: Loan Fees. But TT shows up this item as a "review" at the end


and when I go to review, it shows this (check image). What am I supposed to do here?

[sdarora]

May be this is causing an issue? Which option am I supposed to pick out of the two? I am selecting the No, depreciate my... (which was selected as default)

[PatriciaV · Accepted solution]

When the error message appears, click the No button (final choice).
Your Safe Harbor Election is unrelated to Section 179, so you don't need to change that.