@thuyh1121Your first post in this thread asks about the "trade or business" determination. Nothing about the SEC179.
Can't speak for CA. At the federal level, residential rental property is not eligible for SEC179 (generally), but some rental assets can qualify for the special depreciation allowance. That's a separate thing from determining if a rental activity qualifies as a trade or business.
As for the "how would that change things", here's the monetary difference on the tax front.
With a trade or business, not only is the taxable income subject to the "normal" tax, but it's also subject to the additional 15.3% self-employment tax. Not a "bad" thing really, because the SE tax is something like 3.2% of the 15.3% (give or take) of the employer's side of the Medicare tax, and the remaining the employer's share of the Social Security tax. So it a sense, the SE tax is like "Paying your future self" on the social security side.
Additionally, with SCH C income, that increases your allowed maximum contribution to a qualified tax deferred retirement account. But only if you have an actual taxable profit. Where as passive rental income can not be used in determining one's yearly maximum contribution, and is not used in determining the amount of social security one is eligible to receive at retirement age.
So on the SCH E passive side, the pros are no SE taxes. Cons are, can't be used in determining max retirement contributions, or amount of SS payments at retirement age.
On the SCH C side, the pros are, you can include the taxable profit when determining max contributions to a qualified retirement account. Cons are, you pay the additional 15.3% SE tax on the actual taxable profit.
Keep in mind too, that for most residential rental property owners, actually showing a taxable profit on paper at tax filing time isn't all that common. For those that can and do report rental activity on SCH C, even having to depreciate the property over 39 or 40 years as business property, (vs 27.5 years on SCH E) doesn't always keep the yearly depreciation deduction low enough, so that they actually show an actual profit on the SCH C.
For the ones I hear about that do qualify to report their rental activity on SCH C, that rental activity is but one part of their SCH C business. For example, most realtors operate on a commission that is considered self-employment income. So they're reporting more than just the rental income on SCH C, and therefore have no issue showing a taxable profit on the business.
