Section 179 and rental property depreciation

[StraightSh00ter357]

Back in 2019 I purchased two items for my rental property and claimed Section 179 status for them using TT. 

As I had a net loss that year, their full amounts were carried over in full. The same thing happened with another item in 2021. I finally noted these items were missing any depreciation when I started doing the 2022 taxes. When I attempted to enter the carryover Section 179 amounts, TT produced an error, saying that Section 179 expenditures were retroactively disallowed for rental properties for lodging. Thinking that meant I would lose any depreciation on the items, I attempted to go back to amend the 2019, 2020, and 2021 tax returns, opting for normal 5 year, 200DB on each item. When I tried this on the 2019 return, TT took me into Form 3115, which is apparently meant to legally justify changing my accounting system entirely. Form 3115 is 3 pages of very confusing, and I don't want to get involved if not necessary. Also, why should it be required in this instance, where Section 179 was retroactively removed as an option. When did that happen? Why didn't TT warn me at the time I did it?

[DavidD66]

Instead of filing amended returns, you can file Form 3115 - Application for Change in Accounting Policy with your 2022 return and claim all of the back depreciation you didn't take in 2022.  You can file Form 3115 using  TurboTax Desktop, but you will have to do so in Forms mode - there is no interview or guidance on how to fill the form out.  I recommend you have a local tax professional (CPA or EA) complete Form 3115 for you.  You can then add it to your TurbTax Desktop return, or have the tax pro prepare and file your entire return for 2022.

[Mike9241]

179 was not retroactively removed. the law changed effective for 2018-2025. you have not described what the items were. the 179 rules are complex - certain rules for commercial real estate, certain rules for personal property, and certain other rules for other items. I have provided a link to pub 946 which goes through the various items that qualify for 179  https://www.irs.gov/pub/irs-pdf/p946.pdf (2022 version not available) start on page 15

with a 5 year life - if that's correct - you're referring to appliances that are tangible personal property that should qualify for 179 even though there in residential real estate.

from that pub

Tangible personal property is any tangible property that is not real property. It includes the following property.
• Property contained in or attached to a building (other
than structural components), such as refrigerators,
grocery store counters, office equipment, printing
presses, testing equipment, and signs.

[StraightSh00ter357]

Thanks to Mike9241 and DavidD66 both for the information provided. It appears that the cleanest way to fix the problem is to fill out a Form 3115 and recoup the depreciation from all 4 items involved at one time. That means dealing with that form, and I've got to look at it in more detail before doing anything. All 4 items are considered "F - rental furnishings" on the asset worksheets. I used them in "property acquired to earn income as rental property" as a sideline, not property acquired as part of a business organized to provide rental properties, so they are now excluded from the Section 179 option. Their estimated life for standard depreciation would be 5 years, or I could opt for Special Depreciation Allowance, I guess.