Special Depreciation allowance

[nerobins]

I bought a CH&A unit for my rent house for $4500. Should I take the Section 179 deduction or the 100% special depreciation allowance? I don't understand the difference. Both appear to have same benefit.

[Anonymous]

I bought a CH&A unit for my rent house for $4500. Should I take the Section 179 deduction or the 100% special depreciation allowance? I don't understand the difference. Both appear to have same benefit.

179 is limited to net rental income before the 179 deduction.   the 100% special depreciation allowance (bonus) is not limited to pre- deprecition net income.    so if you have enough rental income the deduction will be the same either way. 

under certain circumstances, the 179 deduction has to be recaptured.  such as if the property was sold before the unit was fully depreciated using the normal MACRS life.  this is not true of bonus.    if it were me I'd take the bonus not the 179.  

[Carl]

You cannot claim the section 179 deduction for property held to produce rental income. This would include any rental assets along with capital improvements.

However, the IRS does allow special qualified properties related only to nonresidential (i.e. Commercial) rental properties to take Section 179.

Qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property are allowed a Section 179 deduction, even if the properties relate to a Schedule E rental property, as long as the lessor considers the rental an active trade or business.

Per IRS Publication 946 How to Depreciate Property, page 16:

Property Acquired for Business Use

To qualify for the section 179 deduction, your property must have been acquired for use in your trade or business. Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify.