Capital Improvements Depreciation / Section 179 (rental taxes) Question

[Jantoven]

So I am a new landlord (primary just got converted to a rental last year), and I am doing my taxes on TurboTax.  When entering some capital improvements that were made, I have various options to pick, including opting to take the full section 179 deduction this year or only taking a partial deduction.  My rental will be operating as a loss on paper due to depreciation.

My question is - why wouldn’t I just go ahead and take the full loss this year for the improvements, which would add further to my net operating loss, and just roll those losses forward to future years to offset income?  Why would someone elect to only partially deduct it each year?

[bacchi]

If the owner is in the 10% tax bracket last year, and doesn't have enough to carry over (>$25k), it'd be better to depreciate the expenses to future years when earned income increases.

To put it another way, why increase the rental loss when taxes due are already $0?

[Jantoven]

To put it another way, why increase the rental loss when taxes due are already $0?

I guess my question is, does it really matter whether I take the entire loss now vs later?  My income is high enough where I can't deduct rental losses against my normal income.  If I have a significant rental paper loss, that loss just keeps carrying forward until it is eventually offset by rental gains - right?

Forgive me if this is a relatively simple question - this is the first time I'm dealing with rental property.

[CareCPA]

Improvements are only eligible for Section 179 if they are Qualified Improvement Property. To be QIP, they must be non-residential.
Certain furnishings, etc in rentals are 179 eligible, but improvements do not appear to be.

Which brings up a bigger point: are you sure they're improvements?

Not to be dramatic, but real-estate depreciation gets complicated pretty quickly.

Furthermore, you can only take 179 deductions up to the amount of profit. If you just let it run through depreciation, it could create a loss and potentially offset other income on your return. If you let the 179 roll forward, it will only release in a year where you show profit.

[Jantoven]

Improvements are only eligible for Section 179 if they are Qualified Improvement Property. To be QIP, they must be non-residential.
Certain furnishings, etc in rentals are 179 eligible, but improvements do not appear to be.

Which brings up a bigger point: are you sure they're improvements?

Not to be dramatic, but real-estate depreciation gets complicated pretty quickly.

Furthermore, you can only take 179 deductions up to the amount of profit. If you just let it run through depreciation, it could create a loss and potentially offset other income on your return. If you let the 179 roll forward, it will only release in a year where you show profit.

Oh okay!  That's good to know.  So for, say, an appliance that was purchase for a residential property (SFH) - this is NOT section 179 eligible, and instead would be deprecated over 5 years.  Correct?

[Rocketman]

Actually the appliance (stove fridge,etc) would be able to be 179.  But improving the bathroom would not. But either way if your rental income is already zero, don’t 179 - just use regular depreciation.