Sort of. It depends.
Yes, you can claim Section 179. However, whether or not you can use the loss in the current year or if the Section 179 is carried to next year depends on the circumstances.
If the business is a Partnership or Corporation, you can not use a loss with Section 179. If you claim Section 179, it will be carried to the next year.
If the business is a Sole Proprietorship (Schedule C or Schedule F on your personal tax return), claiming Section 179 will be allowed IF there is other 'earned income' on the tax return (such as W-2 wages). If there is not enough 'earned income' for the Section 179 to offset, it will be carried to the next year.
Sort of. It depends.
Yes, you can claim Section 179. However, whether or not you can use the loss in the current year or if the Section 179 is carried to next year depends on the circumstances.
If the business is a Partnership or Corporation, you can not use a loss with Section 179. If you claim Section 179, it will be carried to the next year.
If the business is a Sole Proprietorship (Schedule C or Schedule F on your personal tax return), claiming Section 179 will be allowed IF there is other 'earned income' on the tax return (such as W-2 wages). If there is not enough 'earned income' for the Section 179 to offset, it will be carried to the next year.
However, I should add that if your Self Employed business has a loss, it may not be a good idea to use Section 179 to offset your Wages. Using regular depreciation (which is would also be used in future years) would offset both income tax AND self employment tax in future years (assuming the business will have a profit in future years).
Can U explain why it is not a good idea to not take Section 179 to offset Self Employment Wages?
Can U explain why it is not a good idea to not take Section 179 to offset Self Employment Wages?
Huh? What wages? If a sole proprietorship or single member LLC the owner of that type of business can not be an employee of that business they own. Under no circumstances will the owner of a sole proprietorship or single member LLC issue themselves any type of tax reporting document. So if the business operated at a loss for the tax year, there is no SE tax assessed since there's no taxable income to assess it on.
Maybe you have an S-Corp or C-Corp? If so, and you are an employee of that corporation (which you can be) then the corporation *will* pay the SE taxes on the wages they paid you, any way you look at it.
If I have S-Corp, can I take Section 179 depreciation, which brings S-Corp at loss?
As an S corporation, some tax items are deducted on page 1 of the tax return and other items are separately stated on schedule K.
The items that are reflected on page 1 of the 1120s are what determines the loss reported on Schedule K line 1.
The separately items, which Section 179 is one of those items, is reflected on Schedule K. This deduction may or may not be utilized. It is only utilized if there is sufficient business income to take the deduction. This will be determined when completing form 4562 line 11. This is where the business limitation is determined. Keep in mind, that if an S corporation shareholder receives wages from the company, these are considered business income for purposes of this limitation. You need to make sure any wages earned are included in the amount reflected on form 4562 line 11.
Should you be limited, any unused Section 179 will be carried over to the next year.
Just FYI - but here's how I deal with it in my single member LLC business.
- If the business does not have the "Taxable" income from which to take the SEC179 deduction against in the tax year I take it, and;
- If the remaining depreciation after the SEC179 deduction will not be at least $500 for each year, then;
I don't take the SEC179 deduction. Over the long run, (actually, "short" run since most assets that qualify for the SEC179 deduction have a MACRS depreciation schedule of less than 10 years) the SEC179 deduction commonly results in me paying more taxes over the period of depreciation.
Additionally, I think you should look at taking bonus depreciation. There are no business income limitations with bonus as there are with Section 179. This deduction would just be presented on page 1 on the 1120S. Bonus depreciation is not separately stated.
@tax_chap also keep in mind the original question is an "old" post. This forum is on a new platform and many questions from the prior forum were populated into this new forum. Most of those have a June 2019 date.
Generally best to start a new post for your question; best for you and others that may have the same question.
@tax_chap The screenshot below is essentially what @Rick19744 is referring with respect to bonus depreciation. Note that you have to decline Section 179 treatment in the previous screen in order to get to the one shown below.
Quick add-on question with my own scenario:
Based on the scenario above, can I deduct Section 179 expenses when I file my taxes for 2019? Is there anything I should look out for (any word of caution)?
Are there particular asset classes placed in service in 2019 that are not available to take the 100% (or any type) of bonus depreciation?
@rgarcia032 wrote:
Are there particular asset classes placed in service in 2019 that are not available to take the 100% (or any type) of bonus depreciation?
See https://www.irs.gov/newsroom/tax-law-offers-100-percent-first-year-bonus-depreciation
I have a new client for 2019 who had a final LLC K-1 in 2018 with x179 carryover of 2k to 2019.
Does this just get lost now and cannot take for 2019? Or can it be taken as some sort of Capital Loss like "Personal Debt Unrepaid"? Or as an itemized deduction for CA only against W- income? (not allowed for Fed anymore).
This year I have a lot of income from unemployment. Would this be the same sort of w2 type income to make the 179 worth taking advantage of?
Ok ... short lesson in depreciation/179 deduction ... this is the only legal way to manipulate the bottom line of a return after the tax year has closes. There are many options and you should explore them all to see how they will benefit you this tax year and future tax years. Sometimes taking all the expenses you can now will only hurt you in the future.
Say you have an asset with a value of $1000 but your Sch C is already at a loss ... options are:
1) take regular depreciation over the class life of the asset (allowed)
2) take the entire cost as bonus depreciation (allowed)
3) take the 179 deduction on the entire cost ... (it will not be allowed instead it will be carried forward)
4) take some of the cost as a 179 deduction (not allowed) and the rest as reg depreciation (allowed)
Publication 946 … Depreciation
https://www.irs.gov/pub/irs-pdf/p946.pdf
Hi @TaxGuyBill , Why do you say it is not a good idea to use Section 179 to offset my wages and the business has a loss?
I'm a Sole Proprietorship (Schedule C), and this is my first year with the business. I already have a couple of customers and business income, but my business expenses are greater than my business income. I also have a full-time job, and my W-2 wages are at least 8X greater than my business loss. I am planning on buying a Large SUV over 6,000 pounds for business purposes only, and I was thinking of using Section 179, combining my business loss (including 100 % of the car cost) and my other personal job wages, I still have some positive profit at the end of the year. That being the case, would it be better to use section 179? or regular depreciation?
Thanks so much for all your comments and help!
claiming Section 179 will be allowed IF there is other 'earned income' on the tax return (such as W-2 wages).
Agree. I have a similar situation. I have a single member LLC that will file schedule C. I plan to purchase a business through an asset sale, write-off almost all of the purchase price for the assets through section 179 and use this loss to offset a huge chunk of my W2 income elsewhere. Don't know why in this or your situation where you are filing schedule C and have W2 income, why not use section 179 loss against your W2 income?
Using Section 179 will save you income tax this year.
But if you spread out the depreciation so the depreciation applies to years that have a business profit, it will save both income tax AND self employment tax.
I made$749.00 of a trade business and used my vehicle 100% for that and insurance claims(I work for a company with insurance) Can I claim the 179 deduction?
You can claim the section 179 deduction for most business assets, but for the most part you are limited to deducting only enough of the cost of your assets that reduce your business income to zero in the current year. Any used Section 179 deduction can by carried over to future years.
I have a sole proprietorship rental business filing schedule C. I have entered a section 179 deduction for several assets purchased last year and Turbo Tax is NOT warning me I can't use them, even though my business shows a loss and I don't have other income to offset it... Is this is a turbo tax glitch? Should it be telling me that, I can't use the 179 to make my loss enough to not have to pay capital gains on another sale? thanks for your time...