IRS Section 179

General Real Estate Investing
1

Hello board.

Quick question, I have a single member LLC which purpose is to purchase, and rent out residential real estate. The LLC is setup so that I take all deductions and income/expenses on my personal tax return.

I purchased a home in 2008, put it in service in 2009, can I use Section 179 instead of depreciating over 27.5 years?

I know I should go see my CPA but I had to stop using him as he did several mistakes on my return last year, I am still looking for a good CPA in Dallas, TX btw if any of you have any recommendations.

Thanks and good investing…
:beer
Tex

2

mcwagner, who posts here, is a CPA near Dallas.

3

Thanks BLL, I will contact him.

4

I second that recommendation! I actually got to meet Mark in person as I was moving from WA to MS. He’s a very nice and helpful guy.

BTW Mark…my stuff for this year will be headed to you soon.

5

No, you can’t.

Section 179 can not be used in lieu of depreciation for a rental property.

6

Thanks Dave,

I figured so but I wanted others opinion, sometimes it might look like one found Utopia when it really isn’t there :beer

7

to add to what Dave said:

179 is for PERSONAL property. stuff, not real estate.

so you could use 179 for the appliances IN the house, just not for the house itself. Need a new tool? 179. computer to track rent expenses? 179.

8

I have a slightly different take on this.

Tangible personal property is eligible for Sectoin 179 treatment. The IRS defines tangible personal property as any tangible property that is not real property and includes

  • Machinery and equipment.
  • Property contained in or attached to a building (other than structural components), such as refrigerators, grocery store counters, office equipment, printing presses, testing equipment, and signs.
  • Gasoline storage tanks and pumps at retail service stations.
  • Livestock, including horses, cattle, hogs, sheep, goats, and mink and other furbearing animals.

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, and property that produces royalties, does not qualify.

I would argue that an appliance (personal property) installed in your rental property is done so solely for the production of passive income rather than for use in an active income trade or business, and is excluded from Section 179 treatment.

On the other hand, the office equipment that you purchase for use in your property managment company, which manages rental property for a fee, is tangible personal property used in a trade or business and does qualify for Section 179 treatment.

For me, the grey area is the personal computer that you purchase for both personal and business use in your home office where you manage your own rental properties. I probably would agree that the PC might qualify for Section 179 treatment for the amount of the purchase price allocated to business use. I would not push the envelope that far, but I would have no argument if you chose to do so.

Just how I see it.