Section 179 expensing for Roofs

[Donna1]

Under the new rules for depreciation under the Tax Cuts and Jobs Act, we can now take section 179 on nonresidential real property. This includes Roofs. I entered the asset with the 39 year life and took the section 179. Lacerte is giving me a critical diagnostic: Depreciation asset #: Invalid method for section 179 expense. Do I ignore the diagnostic and file the return as is or do I change the life to a method that is valid?

[TaxGuyBill · Accepted solution]

Yeah, it seems like Intuit hasn't updated its software very well for the Tax Cuts and Jobs Act, including the new rules for Section 179.

*IF* it qualifies, I would ignore the diagnostic and file.

However, Section 179 only applies to property used in a "Trade or Business", so you would first need to make the determination if the rental property rises to the level of a "Trade or Business".  The diagnostic should probably be changed to remind you of that requirement, rather than saying it is not allowed.

[Donna1]

It is not a rental property.

[Donna1]

Maybe I am incorrect with the life. The roof is a leasehold improvement. Does that make it 15 year property?

[TaxGuyBill]

Sorry, I saw you said "real" property and my brain interpreted it as "rental" property.

As of now, 39 years is correct.  "Leasehold Improvements" was changed to "Qualified Improvement Property".  Although the INTENT of the law was to make Qualified Improvement Property 15 years, the actual law put it at 39 years.  It seems very likely that Congress will eventually correct that to 15 years, but as of now it is 39 years.

[TaxGuyBill]

... and now that I think about it, a Roof is not Qualified Improvement Property.  That applies to improvements on the internal portion of the building, not an external roof.

[Donna1]

Thank you for your input! All these changes have my head swimming.

[teresa1]

IRS Ruling FS-2018-9 indicates the expansion of the new Sec 179 property allows for nonresidential real property to include Qualified Improvement Property (interior) but also includes Roofs, HVAC, Fire protection system, alarm systems and security systems.

[Cbaugher]

Annoying it's tax year 2021 and there still isn't a box to check to get rid of the dang diagnostic!

[George4Tacks]

You can check the box in the diagnostic to indicate you acknowledge the "Critical diagnostic Warning" Since it is a warning it should not interfere with e-file.

If it does interfere, you can disable the e-file error check https://proconnect.intuit.com/community/electronic-filing/help/disabling-e-file-diagnostic-error-che...

[db1040]

And now it the 2022 tax year, and Lacerte has still not added a check box to designate (Roofs, HVAC, & Fire and Security Systems) as Qualified Real Property, which is 39 yr. property, but Sec. 179 is allowed.

All they need is a check box, QRE - yes or no!  Why is that so hard?