Are you able to use Section 179 Depreciation deduction if your business had a loss?

[Anonymous_]

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@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? 

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See https://www.irs.gov/newsroom/tax-law-offers-100-percent-first-year-bonus-depreciation

[CRINC]

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).

[Quigod007]

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?

[Critter-3]

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

[Rgto]

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).

[downunder301]

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? 

[AmeliesUncle]

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.

[Aisaac882]

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?

[ThomasM125]

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.

@Aisaac882

[huntinad]

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...

[JotikaT2]

While your business has an overall loss, you can still elect to take section 179 on purchased assets.  However, your section 179 deduction should not be deducted in the current year. Instead it should be carried over to next year.  It will be reflected on Form 4562, line 13.  Please see the excerpt below from IRS Publication 946.

@huntinad 

[akbar112285]

Hi, can you please explain this to me a little better? I have a very small business  (LLC) a smoothie and juice business. I do not really operate with profit, mostly break even right now. The first year was a loss. But, I want to buy a sprinter van. I was told I could "write it off" and I wouldn't have to make payments on it, is that true? Will I get a refund large enough to pay off the van? Last year I didn't get a refund at all, I'm assuming because I operated at a loss last year. Im very confused. 

[Mike9241]

the 179 deduction is limited to net business income before the deduction.  however, a greater problem is the lack of profit motive. you need a profit 3 out of 5 years to avoid this being classified as a hobby - if not the IRS could change your returns to reflect just the income earned)   With no income you could take the 179 deduction on the vehicle, however, none would be allowed because of the lack of profit. It would be a carryforward from year-to-year,

whoever told you what you posted doesn't know the tax laws or your situation. tax savings from an expense never offsets 100% of the expense. say the van was $10K. if you were in the top tax bracket you might reduce your taxes $4K leaving you out of pocket $6K. if you are paying no taxes, then you're out of pocket $10K.