Section 179 on a New Roof or HVAC: What Actually Qualifies

A roof is a structural component. So for decades, replacing one meant depreciating it over 39 years, no matter that you paid for the whole thing in March. That is no longer the only option on nonresidential property. Section 179 now reaches roofs, HVAC, fire protection and alarm systems, and security systems, and most owners replacing one have never been told.

What qualifies

Qualified real property under Section 179 covers improvements to nonresidential real property placed in service after the building itself was first placed in service. Specifically:

• Roofs
• Heating, ventilation and air conditioning
• Fire protection and alarm systems
• Security systems

Alongside qualified improvement property, which is interior improvement to nonresidential buildings.

The 2026 numbers

The two limits that decide whether this is real for you

Section 179 gets described as though it were unconditional. It is not, and the conditions are where owners get caught.

It cannot create a loss. Your deduction is limited to taxable income from the active conduct of your trades and businesses. If a $400,000 roof would push you into a loss, the excess is disallowed this year and carries forward. Bonus depreciation has no such limit, which is why it usually does the heavy lifting on the components a cost segregation study identifies, and Section 179 fills the gaps bonus cannot reach.

It requires an active trade or business. Property held merely for the production of income may not qualify. Whether your rental activity rises to a trade or business is a facts-and-circumstances question, and it needs to be settled with your CPA before you plan around this, not after the invoice is paid.

Nonresidential only, which rules out most short-term rentals

The qualified real property category is limited to nonresidential real property. A roof or HVAC replacement on a residential rental building, including most short-term rentals, does not fall into it. That does not leave those owners with nothing. Personal property inside the building stands on its own footing, bonus depreciation reaches assets Section 179 does not, and the partial asset disposition election has no such residential restriction. Most short-term rental owners are better served by the disposition election and a study than by Section 179.

Section 179, bonus depreciation, and the component you removed

These are three separate provisions and a component replacement can touch all three in the same year.

The order matters, the interaction is property-specific, and your CPA makes the call. What we can tell you is which of the three your building is even eligible for, and roughly what each is worth, before you spend anything.

First, can you actually use the deduction this year?

This is the question most firms skip, and skipping it is how owners end up paying for a study that does nothing for them in the current year. A cost segregation study creates a large paper loss. Whether that loss offsets your other income this year depends on you, not on your building.

You can generally use it against active income now if you materially participate in a short-term rental (average guest stay of seven days or less, and you run it yourself rather than handing it to a property manager), if you hold Real Estate Professional status, or if you have passive income to offset. If you own a long-term rental, use a property manager, and have no passive income, the loss is still real but it suspends and releases later, usually on sale. That is a deferral, not a first-year win.

We screen for this before we quote. If your answer is the suspended case, we will tell you, and we will tell you why waiting may serve you better.

Why owners pick Basis

Every other cost segregation firm produces one kind of study, which means every other firm recommends the kind of study it produces. Basis does not produce studies. We source them, which is the only reason we can put both versions of the work in front of you and tell you honestly which one your building actually needs.

• Two real tiers, one honest tradeoff. An engineered study built by our engineering team with full audit representation and errors and omissions coverage, or a faster software-driven study at a lower fee with a thinner engineering paper trail. We recommend engineered by default and we tell you exactly what you give up if you do not take it.
• A minimum ROI, in writing, or it is free. Our study identifies at least 20x its fee in first-year deductions on commercial property, or at least 30x on a short-term rental, or you do not pay for it.
• Your number before you pay anything. Property-specific, modeled from real parcel data, not a slider on a calculator.
• We will tell you no. If you cannot use the deduction this year we say so before we quote you, not after you have paid.

Read the full comparison, including where the big national firms beat us »

Frequently asked questions

Frequently asked questions

Can you use Section 179 on a new roof or HVAC?

On nonresidential real property, generally yes. Qualified real property under Section 179 includes roofs, heating, ventilation and air conditioning, fire protection and alarm systems, and security systems, provided the improvement is placed in service after the building was first placed in service. This was not always the case, and it is still one of the least-known provisions available to commercial owners.

What are the Section 179 limits for 2026?

For the 2026 tax year the maximum deduction is $2,560,000, with the phase-out threshold beginning at $4,090,000 of qualifying property placed in service. Both figures are inflation-adjusted annually. Confirm the current-year numbers with your CPA before relying on them.

Does Section 179 work on a residential rental or short-term rental?

The qualified real property category covers improvements to nonresidential real property. A roof or HVAC replacement on a residential rental building does not fall into that category. Personal property inside the building may still qualify on its own footing, and bonus depreciation reaches assets Section 179 does not, which is usually the better route for residential and short-term rental owners.

What is the business income limitation?

Section 179 cannot create or increase a net loss. Your deduction is capped at your taxable income from the active conduct of your trades and businesses, and anything disallowed carries forward to future years. This is the single biggest practical difference from bonus depreciation, which can create a loss.

Does renting out property count as a trade or business?

Not automatically, and this matters. Section 179 requires property used in the active conduct of a trade or business. Property held merely for the production of income may not qualify. Where your rental activity falls is a facts-and-circumstances question for your CPA, and it should be settled before you plan around Section 179.

Section 179 or bonus depreciation?

They are not mutually exclusive and the right answer is property-specific. Bonus depreciation under Section 168(k) is at 100 percent and can create a loss, which is why it usually does the heavy lifting on the 5, 7 and 15-year components a study identifies. Section 179 reaches certain nonresidential building improvements that bonus does not, but is capped and cannot create a loss. Many owners use both in the same year.

Sources

» Treasury Regulation §1.168(i)-8, disposition of MACRS property
» IRS Practice Unit, Examining a Taxpayer Electing a Partial Disposition of a Building
» Treasury Regulation §1.263(a)-3, amounts paid to improve tangible property (the restoration, betterment, and adaptation tests)
» Treasury Regulation §1.167(a)-7(c), records required for depreciable property
» Internal Revenue Code Section 179, including qualified real property under §179(f)
» Revenue Procedure 2025-32, inflation-adjusted Section 179 limits
» IRS Publication 946, How To Depreciate Property
» See Sources & Citations.