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Section 179 deduction for property used for lodging has been retroactively disallowed

I took a 179 expense deduction for a washing machine on my rental property in 2020.  It was disallowed even though my business had sufficient positive income and the amount was below the limit.  Same thing is happening this year?  How can I get Turbo Tax to allow for the deduction?  Can I edit the 4562 form directly?  The problem seems to be that line 26 is empty, which means total elected cost shows up as zero.  

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10 Replies
ColeenD3
Expert Alumni

Section 179 deduction for property used for lodging has been retroactively disallowed

You are not getting a deduction because you can't take Section 179 for rental property, except for qualified improvement property. You can take bonus depreciation.

 

To qualify for the section 179 deduction, your property must have been acquired for use in your trade or business. 

 

Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify. 

 

 

 

Pub 946

 

 

 

Section 179 deduction for property used for lodging has been retroactively disallowed

@ColeenD3 

 

How do you tell TurboTax it is bonus instead of 179?

ColeenD3
Expert Alumni

Section 179 deduction for property used for lodging has been retroactively disallowed

It is on the same page that you would elect Section 179. The screen reads, 

 

"How Do You Want to Deduct this Item?" Note, that although the Section 179 option is there, it only relates to qualified improvement property.

 

@DanP0428 

Section 179 deduction for property used for lodging has been retroactively disallowed

Thank you for that information.  I appreciate all of your replies.  They are always accurate and don't have a ton of reading links.  You just answer the question and don't make people read a lot of boring pages to try to find the answer in the link.

ColeenD3
Expert Alumni

Section 179 deduction for property used for lodging has been retroactively disallowed

Thank you. That made my day.

Section 179 deduction for property used for lodging has been retroactively disallowed

Colleen, I agree.  Your answer was super helpful (after much confused reading on my part).  THANK YOU!  Would you recommend I go back and change the depreciation method (file an amended return for 2020)?  Or is there another way to rectify the error in this year's tax return?  

 

Turbo tax is so confusing b/c the software suggests this is a viable deduction for a rental property in the easy step guide.  If it's not allowed, it shouldn't be offered - or the language should be simplified so its clear which types of rental properties can take this.  

ColeenD3
Expert Alumni

Section 179 deduction for property used for lodging has been retroactively disallowed

Yes, you can go back and take the depreciation you were entitled to by amending your return. You can't add anything to the 2021 return if it did not take place in 2021.

 

Amending a 2020, 2019, or 2018 state return is very similar to amending a prior-year federal return. Here are some tips:

  • If you're amending a 2020 return you originally prepared in TurboTax Online, you can amend it online by signing in to TurboTax.
  • Be sure to download and install the appropriate state software.
    • For example, to amend your 2018 California return, download and install the 2018 TurboTax California state software.
    • The amendment software that we offer to prior-year TurboTax Online customers includes 1 free state download. Contact us if you need to download additional states that you paid for when you originally filed.
  • TurboTax state programs vary in amendment instructions, but you'll either find the amendment option at the beginning or close to the end.
  • The state program doesn't function as a standalone product. Even if you only need to amend your state return (not the federal), install the federal program for the corresponding tax year.
  • If the change originates on the federal return (for example, you need to add or change your W-2 information), amend your federal return before amending your state. This carries the information over into your state return.

 

@bearcat78

Section 179 deduction for property used for lodging has been retroactively disallowed

THANK YOU!  This was so helpful.  

Redandsi
New Member

Section 179 deduction for property used for lodging has been retroactively disallowed

This computer was bought for my rental property which is my business. How can I adjust this so that I can finish my taxes? This is my only hang up.

 

ColeenD3
Expert Alumni

Section 179 deduction for property used for lodging has been retroactively disallowed

A rental property is not a business unless you are a real estate professional. It is passsive income.

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