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Old 08-26-2016, 11:57 AM
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Section 179 on car for rental property using w2 income

Late in 2014 I bought a car and used it to look for a rental property, which I bought in November of 2014.

I made a lot of improvements and repairs, and none of it was eligible (I think) for any deductions. I first posted the property on Craigslist for rent on December 7th, 2014 (start date for tax purposes, Francis v. Comm'r., TC Memo 1977-170)) property didn't rent or generate income until January 1st 2015.

I was wondering if I could do section 179 to deduct the full cost of the car from the income I generated on my w2 (since my property did not have a chance to generate any taxable income). The cost of the car was $11,000 and I paid over $11,000 in federal income tax in 2014 on my w2.

Can I go back and re-file for 2014 file for section 179 and to get back for taxes I paid from my W-2 income?


Last edited by [email protected] : 08-26-2016 at 01:32 PM.


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Old 08-26-2016, 03:41 PM
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Late in 2014 I bought a car and used it to look for a rental property, which I bought in November of 2014.

I made a lot of improvements and repairs, and none of it was eligible (I think) for any deductions because the property didn't rent or generate income until January 1st 2015. ======>>Section 179 expensing may be used only for used or new property that you purchase for cash during that year

I was wondering if I could do section 179 to deduct the full cost of the car from the income I generated on my w2. The cost of the car was $11,000 and I paid over $11,000 in federal income tax in 2014. =====>>It depends; as a general rule, section 179 deductions are not allowed for rental property activities. Active income from your real estate activities is reported on Sch C and that is where you would take any section 179 expense that is allowed.however, making it active by being a real estate professional (750 hr test etc) does not preclude you from entering your rental activities on a Sch E also.

So, sec 179 can only be used if your rental activities qualify as a business for tax purposes. You can?t use it if your rental activity is an investment, not a business. So, you need to make sure you?re a business before you even think about using Sec 179. Owning rental property qualifies as a business if you do it to earn a profit and work at it regularly, systematically, and continuously. Rental ownership, on the other hand, is an investment, not a business, if you do it to earn a profit, but don?t work at it regularly, systematically, and continuously either by yourself or with the help of a manager, agent, or others. Your business can use Sec 179 to deduct tangible, long-term personal property. However, Section 179 specifically excludes personal property used in ?residential rental property. This means that you can?t use Section 179 to deduct the cost of items thay you purchase for use inside rental units. Say, kitchen ?appliances, carpets, drapes, or etc UNLESS you rent out hotels, motels, or vacation homes where the guests stay less than 30 days. Also, you can use Section 179 to deduct the cost of Personal property you use in your rental business that is not located inside your rental buildings. This can include: computers, telephones and cell phones, office equipment, office furniture you use in your office or other place of business, cars and other vehicles, software, and maintenance equipment such as lawnmowers or etc. Say , you spend $1K for office furniture for the office you use in your rental business, you may deduct the entire amount in a single year using Section 179 on your 1040. If you use property both for business and personal purposes, you may deduct it under Section 179 only if you use it for business purposes more than half of the time. If you purchase more than one item of Section 179 property during the year, you can divide the deduction among all the items in any way, as long as the total deduction is not more than the Section 179 limit. When you deduct an asset under Section 179, you must continue to use it for business at least 50% of the time for as many years as it would have been depreciated. For example, if you use Section 179 for a computer, you must use it for business at least 50% of the time for five years, because computers have a five-year depreciation period.
If you don?t meet these rules, you?ll have to report as income part of the ?deduction you took under Section 179 in the prior year. This is called recapture--something you want to avoid.





Can I go back and re-file for 2014 file for section 179 and to get back for taxes I paid from my W-2 income==>>>>>Correct; as said, you need to file Sch E of 1040 for sec 179 and offset your W2 income. Rental activies can be active or passive. Making it active by being a real estate professional (750 hr test etc) does not preclude you from entering your rental activities on a Sch E. That's the reason if you have active losses from the Sch E activity, it now can offset any active income (like your spouse's W2 income).



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