Because your expenses already exceed your rental income, taking maximum, accelerated depreciation options will not provide you with additional tax benefits for the year. Here's why:
Since your deductible real estate losses are capped at $10,000 for the year, your ordinary expenses alone have maxed out your deduction. Therefore, any depreciation you claim this year, whether standard, SDA or Section 179 will not reduce your tax bill any further. Instead, it will be added to your passive losses carried forward to future years.
Section 179 has limitations. For example, in addition to the "active business requirement", you can only use it for tangible personal property inside the rental, such as for appliances, and not for a bathroom remodel.
SDA doesn't apply to everything. While the SDA does not have the "active business" limitation, it only applies to property with a recovery period of 20 years or less. So, whereas appliances would qualify, a bathroom remodel would not because it is considered a structural improvement and is classified as a 27.5 year property.
By choosing none for Section 179 and opting out of SDA, you will spread your depreciation out over 5 years for the appliances and 27.5 years for the bathroom remodel. This strategy preserves your depreciation deductions for future years when your rental might generate a profit.
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