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You cannot claim the section 179 deduction for property held to produce rental income. This would include any rental assets along with capital improvements.

However, the IRS does allow special qualified properties related only to nonresidential (i.e. Commercial) rental properties to take Section 179.

Qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property are allowed a Section 179 deduction, even if the properties relate to a Schedule E rental property, as long as the lessor considers the rental an active trade or business.

Per IRS Publication 946 How to Depreciate Property, page 17:

Property Acquired for Business Use 

To qualify for the section 179 deduction, your property must have been acquired for use in your trade or business. Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify.

For more information regarding depreciation please refer to the following publication:

IRS Publication 527 Residential Rental Property 

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