I can’t get TurboTax Business 2022 to do a Section 179 deduction for my business. The business, a vacation rental, bought a new heat pump last year after the previous one failed, and I can’t seem to deduct it despite the business earning a profit. I know I can’t deduct the whole amount this year, but I’d like to deduct the amount of profit this year and carry the remainder forward to future years. Here’s what I’m trying in TurboTax (all numbers are rounded off):
On the FEDERAL TAXES tab, when I click on Rental Real Estate, it shows income and expenses (which I have entered previously), with a Net Profit/Loss of $2,500 (i.e., a profit).
On the same FEDERAL TAXES tab, I click on Deductions, then under Rental Real Estate Expenses->Assets (associated with rental property), I click on Update. This brings up a table with Rental Income, where I click Edit. Then I click Add Another Rental Asset. I enter the description (heat pump) and date (spring 2022), then tick the box for “Asset used 100% for business”. On the next screen, I click Rental Real Estate Property and then “Roofs/HVAC/…” because it’s HVAC. Then I enter the cost ($10,000).
On the next screen it asks how I want to deduct it. I choose “Deduct all or part of the item’s value this year. (Take the Sec. 179 deduction.)”. On a following screen, it says “your net business income is $200”, even though the Net Profit/Loss from above was $2500. Under “How much of this amount do you want to deduct”, I enter the full cost ($10,000). A message pops up saying “Your total Section 179 deduction now exceeds your total business income”, with $0 listed for three different totals – including “Total entered for all assets placed in service this year” and “Total carried over for 2023”, which seems wrong. The same info is on the next screen, Total Asset Summary, including $0 for “Total Deduction in 2022”.
Then I finish the Assets part of and click through to the end, answering No to most of the questions since this business is pretty simple – I don’t pay employees, don’t have life insurance, etc. The business income is QBI so I do that part. On the “Your Qualified Business” page, I don’t do any “Other Deductions” because this doesn’t seem like the right place for Section 179 deductions.
A “Section 179 Carryover” page appears with a “199A Worksheet by Activity”, which has mostly 0’s except for “Total 179 deduction allowed for this activity in current year”, which has the $10,000 in the Section 179 Regular Tax column and nothing in the Section 179 QBI column. At the bottom, this worksheet also shows $0 at “Total carryforward to next year”, which seems wrong.
Finally, on another “You Qualified Business” page, it shows $2500 for “Rental Income/Loss” and $0 for “Section 179 Deduction”. Should I override that last $0 with $-2500 here to have it actually do a Section 179 deduction? Or did I do something wrong elsewhere in the step-by-step view?
This is an LLC that uses pass-through taxation to the LLC members , so the 1065 isn’t showing a profit but the Schedule K-1 does show profit of $2500, meaning I’ll have to pay tax on it.
What am I doing wrong that the Section 179 deduction isn't showing up?
