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Eligible Section 179 Property

I have entered 4 assets but want to take the section 179 allowance as an expense for this year. The smart check continues to flag having the 'Yes' checkbox checked.

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2 Best answer

Accepted Solutions
RayW7
Expert Alumni

Eligible Section 179 Property

Make sure the asset qualifies for a Section 179 deduction.

 

To qualify for a Section 179 deduction, the asset must be:

  • Tangible (you're able to touch it, which excludes intangible assets like patents or copyrights)
  • Purchased (not leased) for business use
  • Used more than 50% in your business
  • Placed in service (purchased, acquired, or converted to business use) during the current tax year
  • Acquired from a non-related party

The Section 179 deduction can't be claimed for business assets that were acquired in a tax-free exchange or from a person or entity with whom you share a close relationship as specified by the IRS.

You can't claim a Section 179 deduction for more than $1,040,000 in qualified assets. The deduction is reduced if the total of all Section 179 assets you placed in service during the tax year exceeds $2,590,000.

Your Section 179 deduction amount can't exceed your net business income for the year, but if it does, you can carry the excess over to a future tax year.

Finally, you must retain business use of the asset until the end of its useful life. If that isn't possible, you must pay back part of the deduction as a Section 179 recapture.

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Cynthiad66
Employee Tax Expert

Eligible Section 179 Property

Yes.  The instructions clearly states more than 50%.  See below.

 

Instead of depreciating an asset over a multi-year period, you might be able to deduct its entire cost during the first year of use. This is called a Section 179 deduction, also (erroneously) called Section 179 depreciation. Think of it as instant gratification when it comes to deducting the cost of a newly-purchased business asset.

To qualify for a Section 179 deduction, the asset must be:

  • Tangible (you're able to touch it, which excludes intangible assets like patents or copyrights)
  • Purchased (not leased) for business use
  • Used more than 50% in your business
  • Placed in service (purchased, acquired, or converted to business use) during the current tax year
  • Acquired from a non-related party

The Section 179 deduction can't be claimed for business assets that were acquired in a tax-free exchange or from a person or entity with whom you share a close relationship as specified by the IRS.

You can't claim a Section 179 deduction for more than $1,040,000 in qualified assets. The deduction is reduced if the total of all Section 179 assets you placed in service during the tax year exceeds $2,590,000.

Your Section 179 deduction amount can't exceed your net business income for the year, but if it does, you can carry the excess over to a future tax year.

Finally, you must retain business use of the asset until the end of its useful life. If that isn't possible, you must pay back part of the deduction as a Section 179 recapture.

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16 Replies
RayW7
Expert Alumni

Eligible Section 179 Property

Make sure the asset qualifies for a Section 179 deduction.

 

To qualify for a Section 179 deduction, the asset must be:

  • Tangible (you're able to touch it, which excludes intangible assets like patents or copyrights)
  • Purchased (not leased) for business use
  • Used more than 50% in your business
  • Placed in service (purchased, acquired, or converted to business use) during the current tax year
  • Acquired from a non-related party

The Section 179 deduction can't be claimed for business assets that were acquired in a tax-free exchange or from a person or entity with whom you share a close relationship as specified by the IRS.

You can't claim a Section 179 deduction for more than $1,040,000 in qualified assets. The deduction is reduced if the total of all Section 179 assets you placed in service during the tax year exceeds $2,590,000.

Your Section 179 deduction amount can't exceed your net business income for the year, but if it does, you can carry the excess over to a future tax year.

Finally, you must retain business use of the asset until the end of its useful life. If that isn't possible, you must pay back part of the deduction as a Section 179 recapture.

Eligible Section 179 Property

To be clear this is more of a Turbotax application/checkbox issue - I think.

 

I walked through my information, added my assets - but it's getting hung up later in a check.

 

It says: "Asset ABC Eligible Sec 179 property has an unacceptable value.

[ ] No Entry

[ X] Eligible Sec 179, Yes

[ ] Eligible Sec 179, No

 

 

My items are not more than 50%, they are 50% - so could that be causing the issue?

Cynthiad66
Employee Tax Expert

Eligible Section 179 Property

Yes.  The instructions clearly states more than 50%.  See below.

 

Instead of depreciating an asset over a multi-year period, you might be able to deduct its entire cost during the first year of use. This is called a Section 179 deduction, also (erroneously) called Section 179 depreciation. Think of it as instant gratification when it comes to deducting the cost of a newly-purchased business asset.

To qualify for a Section 179 deduction, the asset must be:

  • Tangible (you're able to touch it, which excludes intangible assets like patents or copyrights)
  • Purchased (not leased) for business use
  • Used more than 50% in your business
  • Placed in service (purchased, acquired, or converted to business use) during the current tax year
  • Acquired from a non-related party

The Section 179 deduction can't be claimed for business assets that were acquired in a tax-free exchange or from a person or entity with whom you share a close relationship as specified by the IRS.

You can't claim a Section 179 deduction for more than $1,040,000 in qualified assets. The deduction is reduced if the total of all Section 179 assets you placed in service during the tax year exceeds $2,590,000.

Your Section 179 deduction amount can't exceed your net business income for the year, but if it does, you can carry the excess over to a future tax year.

Finally, you must retain business use of the asset until the end of its useful life. If that isn't possible, you must pay back part of the deduction as a Section 179 recapture.

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**Mark the post that answers your question by clicking on "Mark as Best Answer"

Eligible Section 179 Property

Thank you for the additional detail. Then perhaps TurboTax should not offer the section 179 Yes/No option if I put in 50% or less.

Eligible Section 179 Property

When I entered the asset I elected not to claim section 179. But now I want to claim it, and Turbo Tax wont  let me change my mind, even though I HAVE NOT FILED THE RETURN! 

How can I make the election? I've tried to delete my file and re-enter it, but it still does not allow. 

 

DianeW777
Employee Tax Expert

Eligible Section 179 Property

To clarify do you have a business or rental property?  It depends on the type of property/asset.  While you cannot take Section 179 deduction for the residential rental property, itself,  you can use Section 179 to deduct tangible, long-term personal property.  This includes, for example, kitchen appliances, carpets, drapes, or blinds. 

  • Date placed in service must be the current year
  • Select the option on the screens following your asset entry
  • Sample of the rental section is shown below.
  • Please provide additional information if you need further assistance and our tax experts can help.

@deborah-iskandar

 

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Melody55Carter
Returning Member

Eligible Section 179 Property

I'm helping my son with his income tax. He is a master mechanic and has to purchase tools for his job and is NOT reimbursed for them.  I'm not having any luck with taking the 179 deduction.  It gives me a 0.  

 

I don't understand this.

 

thanks

AliciaP1
Expert Alumni

Eligible Section 179 Property

If he is an employee and receives a W-2 then he is not eligible to deduct unreimbursed business expenses.  The deduction was eliminated with the 2017 Tax Cuts and Jobs Act.

 

@Melody55Carter

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HR30
Level 2

Eligible Section 179 Property

In December 2021 I bought a new truck for business purposes, real estate property management.  I am trying to take a section 179 deduction against the profit for one property and carry forward the remainder, the disallowed portion.  It seems to meet the criteria for a section 179 deduction, being for business and costing less than the allowed limits.  I expected the section 179 deduction to be allowed up to the profit for the property for 2021 and the remainder to be carried forward to 2022.  Instead, I see no deduction.  I have answered questions in various ways, do not know if I want "special depreciation" and cannot generate any deduction whatsoever, "0".

HR30
Level 2

Eligible Section 179 Property

I purchased a truck for property management, Schedule E and am trying to take a section 179 deduction against the profit for a property. It is for business, new, tangible, less than $1,040,000 and placed in service in 2021.   I expected the section 179 deduction to appear on Schedule E under Assets / Depreciation, but see "0".  I cannot answer the questions in any combination that generates a Section 179 deduction.  What am I doing wrong?  

Eligible Section 179 Property

You mentioned "one" rental.  Is that one rental the only part of your business?  If not, can you clarify what you were referring to by "one" rental?  And if you have multiple rentals, you can't pick-and-choose where to add the deduction - it must be applies proportionately between all rentals that used the truck.

 

Section 179 only applies to a "Trade or Business".  In most cases, only one rental is usually not considered a business.

 

If your activity does rise to the level of a business AND the overall business activity on the entire tax return has a profit (which would include all rentals, W-2s, and self employment income), then you need to make an adjustment to Line 11 of Form 4562 because TurboTax automatically assumes that rentals are NOT a business.

Eligible Section 179 Property

I am having similar difficulty with expensing a roof replacement on a commercial property.  TurboTax (Premier, desktop) asked me if I wanted to deduct the full value this year, I selected that option. The cost is $23K and there is sufficient profit to cover that deduction.  The program confirmed my "estimated expense" for this year of $23K. The asset summary shows it in the Section 179 column. But, it is not being deducted from the net profit??

Eligible Section 179 Property

look at line 11 of form 4562, that is probably blank which limits the 179 deduction to zero. 

this is from IRS PUB 946 deprecation

Business Income Limit
The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the manage-ment or operations of the trade or business.
Any cost not deductible in 1 year under section 179 because of this limit can be carried to the next year. Special rules apply to a deduction of qualified section 179 real property that is placed in service by you in tax years be-ginning before 2016 and disallowed because of the business income limit. See Special rules for qualified section 179 real property under Carryover of disallowed deduc-tion, later.
Taxable income. In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year

 

 

even checking the active participation box for the real estate does nothing. 

 

this is from IRS reg 1.179-2(c)

(6) Active conduct by the taxpayer of a trade or business—(i) Trade or business. For purposes of this section and § 1.179–4(a), the term trade or business has the same meaning as in section 162 and the regulations thereunder. Thus, property held merely for the production of income or used in an activity not engaged in for profit (as described in section 183) does not qualify as section 179 property and taxable income derived from property held for the production of income or from an activity not engaged in for profit is not taken into account in determining the taxable income limitation.

(ii) Active conduct. For purposes of this section, the determination of whether a trade or business is actively conducted by the taxpayer is to be made from all the facts and circumstances and is to be applied in light of the purpose of the active conduct requirement of section 179(b)(3)(A). In the context of section 179, the purpose of the active conduct requirement is to prevent a passive investor in a trade or business from deducting section 179 expenses against taxable income derived from that trade or business. Consistent with this purpose, a taxpayer generally is considered to actively conduct a trade or business if the taxpayer meaningfully participates in the management or operations of the trade or business. A mere passive investor in a trade or business does not actively conduct the trade or business.

 

see this link and look at the section Rental real estate and Sec. 179

 

https://www.thetaxadviser.com/issues/2020/oct/maze-real-estate-rentals.html 

 

Eligible Section 179 Property

Thank you, Mike!  I'm not sure why that line is left blank; when I had a similar situation several years ago, it seemed to pick up the business net income correctly. But it is leaving it blank and carrying forward the 179 deduction.  (And yet, it is deducting it from income for the QBI calculation on Form 8995-A - ???)
Do I just have to manually enter the net income on line 11?

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