Question

Rental Real Estate Depreciation

Forum|Forum|6 years ago
February 22, 2020
3 replies
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New roof on a commercial property - cost $30,000. If I enter the full amount for a Section 179 deduction there is no loss carry forward listed on the worksheet even though the deduction is greater that the income for the building, loss of $14,000. Why does it not carry the $ 14,000 loss forward to tax year 2020?

K

KarenM90

Can you clarify? Are you preparing an individual tax return (Form 1040?)

Generally, you cannot take a 179 expense on a rental property, with a few exceptions.

Please see this IRS publication related to qualifying properties: IRS Pub 946 This publication indicates under qualifying property: Property Acquired for Business Use 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.

If you do qualify and you are preparing a business return for a flow-through entity (Sub S, Partnership, etc section 179 is elected at the corporate level and limited at the corporate and shareholder levels.

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Carl11_2

Employee

New roof on a commercial property

Is this commercial property that you own and rent out to a business tenant? Or commercial property that you're paying rent for? (for your business.)

This matters because if the latter then the new roof is a leasehold improvement, and different rules apply.

A

AmeliesUncle

It is probably using the full $30,000 of Section 179, so none of the §179 is being carried forward.

The limitation is based on your "Trade or Business" income on the tax return, not just the rental. And at least for this purpose, "Trade or Business" income includes any W-2s that you received.

But as was mentioned before, Section 179 is only allowed if your rental rises to the level of a "Trade or Business", so be sure it qualifies.