How do I get the special tax treatment on QRP (Qualified Real Property)?
On the 4562 Depreciation Detail screen, choose which QRP is applicable in the middle right section of the screen (labeled Qualified Nonresidential Property beginning in Drake18). Applicable choices are:
- A - Qualified leasehold improvement property
- B - Qualified restaurant property
- C - Qualified retail improvement property
- D - Qualified Improvement Property (placed in service after 2017)
For tax years 2010-2015, taxpayers could expense up to $250,000 of the cost of qualifying real property (QRP) placed in service during the year rather than recovering the cost through depreciation deductions. Beginning in tax year 2016, there is no additional dollar limitation for qualifying real property, however the Section 179 Expense deduction dollar limitation of $1,000,000 ($510,000 in Drake 2017 and $500,000 in Drake 2016 and prior) applies. For tax years beginning in 2019, the 179 limit is $1,020,000. For tax years beginning in 2020, the maximum section 179 expense deduction is $1,040,000. For tax years beginning in 2021, the maximum section 179 expense deduction is $1,050,000.
Note: You may receive an EF message page (1143 in an 1120, 5623 in a 1040, or 1043 in a 1065) asking you to select a method other than EXP on the asset(s) involved in Section 179 expensing. If the QRP basis is more than the max allowed ($1,000,000), you will need to enter another method (such as SL, M, etc.) and enter the expensed amount in the 179 expense elected this year field.
See Tax Topic 704 for more information.