What Section 179 does
Section 179 lets businesses deduct the full cost of qualifying assets in the year placed in service, up to annual limits set by the IRS. For rental property, it applies mainly to personal property within the rental (appliances, certain fixtures) and qualified improvement property — not the building structure itself, which must be depreciated over 27.5 or 39 years.
When recapture is triggered
If you claim a Section 179 deduction but later dispose of the asset — or drop business use below 50% — before the end of its MACRS recovery period, you must recapture some or all of the deduction. The recapture is treated as ordinary income reported on Form 4797, following Section 1245 rules.
How it differs from Section 1250 recapture
Section 179 recapture is ordinary income with no 25% cap — unlike the unrecaptured Section 1250 gain that applies to buildings. This makes careless use of Section 179 on short-held personal property potentially more expensive than standard building recapture. Plan your holding period before claiming large Section 179 deductions.
Frequently asked questions
Does Section 179 apply to rental buildings?
No — the building structure is not eligible. It applies to personal property within the rental and qualified improvement property.
Is Section 179 recapture taxed as ordinary income?
Yes. Section 179 recapture follows Section 1245 rules: ordinary income at your full marginal rate, with no 25% cap.
Sources
- IRS Topic No. 409 — Capital Gains and Losses
- IRS Publication 544 — Sales and Other Dispositions of Assets
- IRS Publication 527 — Residential Rental Property
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.