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Section 179 and Rental Property

Section 179 deductions allow for the deduction of the cost of certain qualifying equipment in the year purchased but does not apply to equipment purchased for a rental property.

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Section 179 deductions refer to the ability to deduct in the year purchased some types of personal property purchased for use in a business. The most common example talked about in recent years is the deduction of SUVs and other larger vehicles used as part of the taxpayer's business. Other common items capable of section 179 deduction are computers, office equipment and furniture for a home office, etc.

This is not intended to be a thorough overview of section 179 deductions but two points need brought up here. First, section 179 does not apply to property purchased for rental properties (see IRS pub 527 (first page) for more info). For instance, if you buy a new stove for one of your properties you must depreciate that piece of equipment over five years. You cannot accelerate it to the year purchased via section 179.

Secondly, for your home office and automobile section 179 deductions to be valid you must be in the rental business - not a passive investor. For more on this designation see business owner vs. passive investor.

The bottom line is that section 179 is not of very much use to rental property owners except as it applies to items you might purchase for your home office. As an aside please note that the items purchased for your home office don't need to be brand new, just new to you. They simply need to be purchased from the "outside world". In other words, items you buy from relatives or other entities you own don't apply but a used piece of equipment from a third party is ok.

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