Tax Year Prior to 2020: Section 179 Depreciation

[paforeleft]

I am the co-owner of a commercial property that is leased to 2 businesses on the first floor and offices on the second floor. We recently had to install an expensive fire sprinkler/suppression system due to city codes for a restaurant that we leased to.

Section 179 appears to allow for us to expense this purchase but it is not completely clear. As i read it, if  renting the property is considered a business to us, then we can deduct if the property is just an investment to us then we can't. It is actively managed by a professional property manager and all of the co-owners are active participants in the decisions that go into leasing, maintenance etc. There will still be positive income on the building even with this expense. 

Can we expense this improvement this year per section 179 or do we need to depreciated it?

Thank you for your thoughts.

[VictorW9]

There are three main limits on the amount of section 179 deductions:

1) A dollar limit on the deduction ( dollar limit)

2) Limit on the amount of investment in section 179 property (investment limit)

3) A taxable business income limit (income limit)

One and two above I presumed have already been determined. After these are applied, then the deductions are further limited to the individual taxpayer's taxable income from the active conduct of a trade or business during the tax year. If you elected to expense more than taxable income limit, then the overage is not deductible and is carried forward for an unlimited number of years.

Again make sure all three limits are tested before you make a decision as to whether taking the Section 179 is preferable than taking normal depreciation.