Section 179 business income problem

[edadave]

My 179 elections are disallowed during final SmartCheck. It appears that only Schedule C income is considered business income which for me is $0 and that limits 179 expenses to $0. Shouldn't the limit include Schedule E income? 

[Mike9241]

on what form are you trying to take the 179 deduction? what is the activity - residential rental, commercial rental, residential rental with short term leases and significant services provided like a B&B, partnership or S-Corp? for partnership or s-corp what type of investor/owner are you - passive, active participation or material participation and what does the entity do? 

[edadave]

It’s active participation residential real estate. When entering new asset, TT offers 179 and I elect it. Survives until final check for while return where TT says my 179 limit is $0. There is lots of schedule E income so not understanding why TT says limited to $0. Form for Depr shows business income Is $0. 

[edadave]

Perhaps it isn't eligible, but I'm not too happy that TT invites a 179 election after asking all of the relevant questions, but then capped the 179 expenses at $0 later. The good-enough solution in my case was to select the 80% expense for the asset instead of 179. It would have been nice if TT suggested that somewhere but that may be expecting too much.

[AmeliesUncle]

Rentals only would qualify for Section 179 if (1) the rental rises to the level of a "trade or business" AND (2) it meets one of the exceptions to the general rule about property leased to other does not qualify for Section 179 (see link).

Because of those restrictions, TurboTax automatically assumed it does NOT qualify (and does not ask the proper questions to allow it under the qualifying circumstances).  *IF* it does qualify for Section 179, then you need to manually go into the "Forms" (only available on the CD/downloaded versions) and change line 11 of Form 4562.

https://www.irs.gov/publications/p946#en_US_2023_publink[phone number removed]