Section 179 Depreciation

[gillen 13]

When Turbotax figures my section 179 depreciation on a 27,985 roof replacement is says I only have $90 of income to deduct from therefore that is all I can deduct.  I show that the business has over $45,000 in profit.  

Why am I only getting $90 to depreciate this year & then it is showing depreciating the rest over 39 year?

[ReginaM · Accepted solution]

A roof replacement does not qualify for the Section 179 deduction as it is considered Real Property.  Real property is defined as land, buildings, permanent structures and the components of the permanent structures (including improvements). Other examples of property that would not qualify for the Section 179 Deduction include paved parking areas and fences.

A roof replacement is depreciated over the life of the building which for a business is 39 years, this would be prorated for the year. 

For further information in regards to depreciation see IRS Publication 946.

[azm]

I was reading that the tax cut and jobs act was allowing section 179 depreciation for new roofs on commercial buildings (now qualified real property). I am confused that some say it has to be depreciated over 39yrs.  I have $19000 in rental income, more than enough to cover the $8000 roof.  Turbo tax will not allow the deduction?

[azm]

did the Tax Cuts and Jobs Act allow roofs to be qualified real property and thus eligible for section 179 expense?

[KurtL1]

New Tax Rules Affect Expensing of Roofs. The Tax Cuts and Jobs Act of 2017 has expanded the definition of Section 179 expending to effectively include improvements to nonresidential roofs, while raising the amount a taxpayer may expense on qualifying real property.

Rental property in not considered Nonresidential..

[shmathes]

I have the same problem.  Not allowing me to deduct the section 179 for a nonresidential rental roof.  Says I don't have any income.  Have you figured out how to do it in turbo tax?

[JamesG1]

Is your earned income too low and the software not allowing the deduction?

This TurboTax Help explains Section 179 deduction rules and limitations for 2020:

• The asset must be tangible personal property, including software (not real estate).
• It must be used in a trade or business (property used in a rental activity is generally not eligible).
• You must take the deduction in the year you start using the asset.
• The decision to use Section 179 must be made in the year the asset is put to use for business.
• The deduction cannot be more than your earned income (net business income and wages) for the year.

[kswndpt]

For residential real estate purposes, when you purchase the property and you place in service the entire house. Say 10 years down the road you replace the roof. At that point, you do not depreciate both the old and the new roof. At the point of the new roof replacement, the old roof cost is expensed, but I do not know how to do that in Turbo Tax. Please advise

[ReneeM7122]

It depends.  If you are selling the property, you will need to use Form 4797,   Sale of Business Property and Involuntary Conversions of Assets.  If you are not selling, you will follow the interview questions to access the "asset"" (the roof) and "sell" it for $0.  That will put your remaining basis below $0 which effectively "uses up" the remaining depreciation.

Here is a TurboTax article about managing assets.