Section 179 & Form 4562 Equipment Leasing Business

[SamKnows]

My wife and I entered into a small equipment leasing contract in May 2017 with a local business: refrigerators for a food production facility. We've been told to use a Section 179 deduction so we can deduct the full amount in 2017. I've read the voluminous set of Sec 179 rules. But where do I begin the process in TurboTax Deluxe to list the equipment data and get to Form 4562.  Also, we have earned income of $6000 in 2017, plus lease payments to us of $1100. Can we deduct both of these and carry forward the rest of the deduction to 2018 and beyond until exhausted? This one is tough..we appreciate your best answers.

[PatriciaV]

Just to clarify: Are you running an equipment leasing company and have purchased equipment to lease to others? Or are you leasing equipment from someone else to use in your company? Also, is the "earned income" from the business or from another source?

[SamKnows]

We purchased equipment and are leasing it to a local business S corporation. The earned income is from a part time job I worked in 2017, and a few months of income resulting from lease payments made to us.

[PatriciaV]

Thank you for the additional information.

Yes, you may claim Section 179 depreciation for the equipment you have purchased to lease to others.

However, you can take Sec 179 for no more than $500,000 of the cost of qualified assets placed in service during the year.

Also, your Sec 179 deduction cannot be more than your net business income. Any Sec 179 deduction that exceeds that amount can be carried forward and claimed in a subsequent year.

You also have the option to take Sec 179 on all or a portion of the cost of qualifying property. If you choose to deduct only a portion, you can generally depreciate the remaining cost over the asset's useful life.

After you set up your business for Schedule C, TurboTax will offer the Section 179 election (for all or part of the cost) as you set up your business assets for depreciation. When you enter depreciable assets – vehicles, buildings, farm equipment, intellectual property, etc. – TurboTax will automatically generate Form 4562 and all related forms & worksheets.

The easiest way to find Schedule C in TurboTax is to open your return and use the Search box at the top right side of the TurboTax header. Enter "schedule c", hit Enter, then click on "jump to schedule c". This will take you directly to the start of this section where you can set up your business and enter your income & expenses.

From the Business Summary page, scroll down to Assets/Depreciation and click Edit/Update. The first set of questions relates to the Safe Harbor Election, which allows you to expense certain assets that you would normally capitalize (limited to $2,500 per asset). If you choose this election, you will enter the assets as Business Expenses and not under Depreciation.

After the Safe Harbor Election questions, you can begin adding your Assets for Depreciation. It's best to enter each asset separately to avoid any problems in the future should an asset be retired, stolen, or sold. Look for the Section 179 page and read any blue links ("Learn More") on any entry page if you need help.

Or come back to this forum and post another question.

Good luck!

Additional Info

• What is a Section 179 deduction?
• What can I expense or depreciate with the new business safe harbor election?