Non Qualifying Property

While most equipment that small businesses lease, finance, or purchase will qualify for the Section 179 Deduction, there are some exceptions. This page aims to provide a comprehensive guide on properties that do not qualify for Section 179 Deduction.

Although we provide a detailed list below, it cannot cover everything. If you have any questions about your property or equipment qualifying, please see the IRS Tax Information for Businesses website or consult your tax preparer regarding your question.

• As mentioned, most normal business equipment will qualify for the Section 179 Deduction. Some of the property and equipment that does not qualify for the Section 179 Deduction is listed below:

• Real Property: This includes land, buildings, permanent structures, and components of the permanent structures (including improvements). Real Property is typically defined as land, buildings, permanent structures and the components of the permanent structures (including improvements not specifically covered on the qualifying property page). Other examples of property that would not qualify for the Section 179 Deduction include paved parking areas and fences.

• Property used outside the United States: Assets primarily used outside the United States do not qualify for the Section 179 Deduction.

• Property used for lodging: Property that is used to furnish lodging (e.g., furniture in hotels) is generally not qualified for the Section 179 Deduction.

• Property acquired by gift or inheritance: Additionally, property purchased from related parties does not qualify for the Section 179 Deduction. In other words, you can’t sell equipment to yourself and qualify for Section 179.

• Certain vehicles: Vehicles that are not used predominantly (more than 50%) for business purposes, or vehicles used for commuting, are not eligible.

• Air conditioning and heating units: These are generally not considered eligible unless they are an essential part of a manufacturing process.

• Property not used predominantly in a qualified business: Assets that are not predominantly used in an active trade or business during the tax year.

If you are not sure whether or not your property or equipment should be considered Personal Property or Real Property, please consult your tax preparer to ensure that you are complying with IRS §179. While the Section 179 Deduction offers a tremendous advantage to small businesses across the country, it is up to you to ensure that any deductions you are taking are within the legal requirements of Section 179.

Air Conditioning and Heating Units

While air conditioning and heating units are generally not eligible for the Section 179 deduction, there are specific circumstances where they might be considered eligible. For example, if the HVAC are an essential part of a manufacturing process, they might be considered eligible.

Vehicles

There is a common misconception that all vehicles used in business qualify for the Section 179 deduction. However, this is not the case. There are specific criteria based on weight and usage that determine a vehicle’s eligibility. For more information, see Section 179 Vehicle Deductions.

Used Equipment and Vehicles

A common question regarding Section 179 is, “Can Section 179 be taken on used property?”. The answer is yes. Used property can qualify for the Section 179 deduction if it’s purchased or financed, put into service in the tax year of the claim, used over 50% for business, and is “new to you”, meaning it’s new to your business regardless of whether it is brand new.

Property Acquired from Related Parties or Inheritance

Please note that property acquired from related parties or by inheritance does not qualify for the Section 179 Deduction.

Used Equipment and Vehicles

A common question regarding Section 179 is, “Can Section 179 be taken on used property?”. The answer is yes. Used property can qualify for the Section 179 deduction if it’s purchased or financed, put into service in the tax year of the claim, used over 50% for business, and is “new to you”, meaning it’s new to your business regardless of whether it is brand new.

Property Acquired from Related Parties or Inheritance

Please note that property acquired from related parties or by inheritance does not qualify for the Section 179 Deduction.

Having Non-Qualifying Property does not necessarily eliminate the benefits of Section 179 Deduction but can limit the total amount you can deduct. It’s important to categorize your assets accurately to optimize tax savings.

Alternative Tax Deductions and Credits

If you have Non-Qualifying Property, consider alternative deductions such as depreciation or explore other tax credits.

Best Practices in Asset Acquisition and Management

Plan your asset acquisitions strategically to maximize tax benefits. Consult with a tax professional to optimize asset management.

Understanding Non-Qualifying Property is essential for effective tax planning. It is important to remember that tax laws are complex and may change, and that the information provided on Section179Org is intended for general educational purposes.

Disclaimer: Please note that Section179.Org does not provide personalized legal or tax advice, and does not answer specific questions about individual situations. For all legal and tax matters specific to your situation, it is highly recommended that you consult a qualified tax professional who can provide you with tailored advice and assistance.