Section 179 Carryover

Forum|Forum|1 year ago
February 19, 2025
2 replies
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I purchased blinds last year for rental property. It was reported as section 179 depreciation BUT the depreciation wasn't allowed due to insufficient income. This year, Turbotax shows the 179 depreciation carryover as an error because "it's not commercial property". How do I correct this and finish my report?

KrisD15

The Section 179 Deduction is not allowed on an asset that is used for passive rental income.

According to the IRS:

“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.”

To claim the carryover for a business asset,

Go to the Business Section

select EDIT for that Business
Scroll down to "Final Details Carryovers, limitations, summary, at-risk"
Scroll down to "Special Situations" START or UPDATE

Select "I have unused section 179 expenses carrying over from 2023"

Enter the amount on the following screen

There is a "Learn More" link on the screen to elect the 179 Deduction which explains how the deduction may not be allowed. This can be over-ridden the year the asset was placed into service, but will not allow you to carry the unallowed loss to the following year return if the asset is not business related.

[Edited 3/2/2025 I 11:00am PST]

@user33

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user33Author

What EXACT form/worksheet are you looking at? Provide the name! I don't have anything ending with the heading "special situations". Plus, all input lines for section 179 state "disallowed" and not "unused".

AmeliesUncle

Did the rental show a profit last year? If so, it is likely TurboTax incorrectly denied the deduction last year, so you would not have a carryover to this year (you would need to amend last year's return to claim it).

As a side note, the error message about it not being commercial property is outdated because it is based on law from 2017 and earlier. The fact it has been allowable for residential property since 2018 doesn't give me much confidence in the reliability of the program.