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 it is free.
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.
Section 179 reaches the roof. A study looks at the rest of the building.
A roof or HVAC unit is one component. The 30-second check asks a few questions and shows the first-year deduction range a study would look for across the whole building. No email to see the range.
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
Section 179 limits for the 2026 tax year, inflation-adjusted under Revenue Procedure 2025-32. Confirm current-year figures with your CPA before relying on them.
Item
2026
Maximum deduction
$2,560,000
Phase-out threshold
$4,090,000
Reduction above the threshold
dollar for dollar
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. Neither the disposition election nor a study is limited to nonresidential property.
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.
How the three interact on a nonresidential component replacement. General framing, not a recommendation for your property.
Provision
What it reaches
Can it create a loss?
Cap
Section 179
Roofs, HVAC, fire protection, security, QIP, nonresidential only
No
$2,560,000
Bonus depreciation, Section 168(k)
Property with a recovery period of 20 years or less, which is what a study creates
Yes
none
Partial asset disposition
Remaining basis of the component you removed
Yes, it is a loss
none
The order matters, the interaction is property-specific, and your CPA makes the call. What we can do is walk through the tests for each of the three and show the first-year deduction a study would look for, 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 before they know whether they can use the deduction 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.
We screen for this before we quote. If the test for using the loss this year is not met, we will say so before you pay anything.
Why owners pick Basis
Most cost segregation firms sell one kind of study, so that is the one they recommend. We sell two, both engineered, and we will tell you which one your building needs.
Two tiers, and the building decides. The budget tier is a remote study by our engineering team, built from your photos and documents with no site visit, for simpler properties at the lower fee. Bigger or more complex buildings get the full tier, which adds individualized engineering review. Either way, a 70-plus page report and audit support come with 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 the test for using the deduction this year is not met, we say so before we quote you, not after you have paid.
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.
Basis Property Group provides cost segregation studies. It is not a certified public accounting firm or a law firm, and nothing on this page constitutes tax, legal, or accounting advice. Figures shown are preliminary and illustrative. Actual results depend on an engineered study and on your individual circumstances, including Pennsylvania state tax treatment, and are determined by you and your tax advisor.
IRS ATG Aligned · Methodology per IRS Pub 946 & Treas. Reg. §1.168 · Engineering-based component studies · Form 3115 / 481(a) look-back · Works directly with your CPA
Basis works with commercial and short-term rental owners in all 50 states, with guides covering 44 vacation rental markets. Estimates run off the county's own assessment records, including a proprietary data engine covering more than 14,000 Pennsylvania commercial and industrial parcels.