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Publication 946

What Property Does Not Qualify?(p18)


Words you may need to know (see Glossary)

Certain property does not qualify for the section 179 deduction. This includes the following.

Land and Improvements(p18)

Land and land improvements do not qualify as section 179 property. Land improvements include swimming pools, paved parking areas, wharves, docks, bridges, and fences.

Excepted Property(p18)

Even if the requirements explained earlier under What Property Qualifies are met, you cannot elect the section 179 deduction for the following property.

Leased property.(p18)

Generally, you cannot claim a section 179 deduction based on the cost of property you lease to someone else. This rule does not apply to corporations. However, you can claim a section 179 deduction for the cost of the following property.
  1. Property you manufacture or produce and lease to others.
  2. Property you purchase and lease to others if both the following tests are met.
    1. The term of the lease (including options to renew) is less than 50% of the property's class life.
    2. For the first 12 months after the property is transferred to the lessee, the total business deductions you are allowed on the property (other than rents and reimbursed amounts) are more than 15% of the rental income from the property.

Property used for lodging.(p18)

Generally, you cannot claim a section 179 deduction for property used predominantly to furnish lodging or in connection with the furnishing of lodging. However, this does not apply to the following types of property.
Energy property.(p18)
Energy property is property that meets the following requirements.
  1. It is one of the following types of property.
    1. Equipment that uses solar energy to generate electricity, to heat or cool a structure, to provide hot water for use in a structure, or to provide solar process heat, except for equipment used to generate energy to heat a swimming pool.
    2. Equipment placed in service after December 31, 2005, and before January 1, 2017, that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight.
    3. Equipment used to produce, distribute, or use energy derived from a geothermal deposit. For electricity generated by geothermal power, this includes equipment up to (but not including) the electrical transmission stage.
    4. Qualified fuel cell property or qualified microturbine property placed in service after December 31, 2005, and before January 1, 2017.
  2. The construction, reconstruction, or erection of the property must be completed by you.
  3. For property you acquire, the original use of the property must begin with you.
  4. The property must meet the performance and quality standards, if any, prescribed by Income Tax Regulations in effect at the time you get the property.
For periods before February 14, 2008, energy property does not include any property that is public utility property as defined by section 46(f)(5) of the Internal Revenue Code (as in effect on November 4, 1990).