179 Carryover Error property type

[vsc]

I completed last year tax individual tax return with 1st time rental property converted from personal to rental. Personal days in home was 33 remaining days rented. Property type was 1 single residential home. Transfer data from 2020 to 2021. Began entering rental expenses under rental property Proseries who flash to say unable to take since property is not commercial property. Overlooked to address later. Finished entering information for return. No errors except one on the schedule E worksheet under   carryovers to 2021 smart worksheet letter A Section 179 carryover which has a message saying unable to take since property is not commercial. Three questions: If customer is renting the property in 2021 for the full 365 days, was I suppose to change the property type or will it remain the same 1? Note customer is not in real estate just renting property. Secondly, why is there an error on the 179 carryover if it transferred over? Lastly, still on the schedule e worksheet under the carryover by year section the carryover amount is a negative under year 2018 instead of 2020.prior year, why is that?

[TaxGuyBill]

---

@vsc wrote:

Began entering rental expenses under rental property Proseries who flash to say unable to take since property is not commercial property ... A Section 179 carryover which has a message saying unable to take since property is not commercial.

Three questions: If customer is renting the property in 2021 for the full 365 days, was I suppose to change the property type or will it remain the same 1?

---

What exactly is the item that you used 179 for?  Depending on your answer, the program might still be outdated from a few years ago, when 179 was not able to be used for residential rental property.

It still remains as residential rental property, not commercial.

Be careful with using 179 for rentals.  ProSeries does NOT factor the income/loss into the income limitation on the top of 4562 (line 11-ish?), so you need to manually change that.  For federal purposes, you would usually want to use Bonus depreciation rather than 179 (although 179 may be beneficial for some state purposes).

[TaxGuyBill]

I should add one more thing:  In order to qualify for §179, then rental needs to rise to the level of a "trade or business".  If the rental does not rise to that level, it does not qualify for §179. 

If this is their only rental property, I opinion is that that most circumstances would NOT rise to the level of a "trade or business", and therefore not qualify for §179.

[vsc]

Thanks TaxGuy. Just to make sure you caught it, this is a carryover from 2020. The 179 was noted on the 2020 4562 form on line 11. When the system transferred the 179 carryover totals over, I am now reading an error as if the property type will not allow the carryover. How do I handle this? Also note that there were multiple 179s in 2020. This is just the total that transferred. Thanks. 

[TaxGuyBill]

My same comments apply.

Was §179 even allowed (was it a "trade or business")?  If not, then you delete the carryover and amend the prior year.

If it was allowed, as I said before it is likely an outdated comment in the program, and you can just ignore the message (you may need to un-check error checking while e-filing).