179 is limted
The amount allowed as a deduction for any taxable year shall not exceed the aggregate amount of taxable income of the taxpayer for such taxable year which is derived from the active conduct by the taxpayer of any trade or business during such taxable year. for some reason Congress decided that w-2 wages are business income but passive income like rental is excluded.
from line 11 instructions; The total cost you can deduct is limited to your taxable income from the active conduct of a trade or business during the year. You are considered to actively conduct a trade or business only if you meaningfully participate in its management or operations. A mere passive investor is not considered to actively conduct a trade or business.
the active conduct of a trade or business for 179 taxable income limit is not the same as material participation under the Section 469 passive activity rules. yjis limit requires meaningful (undefined) participation in the business's management or operations reg 1.179-2(c)(6)(ii) as follows:
(ii) Active conduct. For purposes of this section, the determination of whether a trade or business is actively conducted by the taxpayer is to be made from all the facts and circumstances and is to be applied in light of the purpose of the active conduct requirement of section 179(b)(3)(A). In the context of section 179, the purpose of the active conduct requirement is to prevent a passive investor in a trade or business from deducting section 179 expenses against taxable income derived from that trade or business. Consistent with this purpose, a taxpayer generally is considered to actively conduct a trade or business if the taxpayer meaningfully participates in the management or operations of the trade or business. Generally, a partner is considered to actively conduct a trade or business of the partnership if the partner meaningfully participates in the management or operations of the trade or business. A mere passive investor in a trade or business does not actively conduct the trade or business.
for a real estate professional real estate rental is not a passive activity so one would think if that box is checked the 179 deduction should be allowed. not so in desktop deluxe. even as a real estate professional with profit from rental activities business income shows up as zero so no 179 allowed. I also tried checking the "active" and or the "material participation" boxes on the rental with no luck
however, there is a work-around that's better. skip the 179 and allow the maximum 168k depreciation to be computed - 168k does not have a business income limitation.
