Excepted Property

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

• Certain property you lease to others (if you are a noncorporate lessor).

• Property used predominantly outside the United States, except property described in section 168(g)(4) of the Internal Revenue Code.

• Property used by certain tax-exempt organizations, except property used in connection with the production of income subject to the tax on unrelated trade or business income.

• Property used by governmental units or foreign persons or entities, except property used under a lease with a term of less than 6 months.

Leased property. 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.