How to use Section 179 deduction from an LLC to offset personal (W2) income?

[omidjahromi]

Hi, I am using TurboTax Business to calculate create form K-1 for my LLC. The LLC has two partners. Both partners have other source of income (W2 wages) as well.

The LLC has about $15000 income and about $19000 in expenses (before section 179 deductions). Now, I have also purchased about $13000 in equipment (assets) which I would like to include in my K-1 as Section 179 deduction .

Since my net business income is negative, Turbo tax says that the Section 179 deductions will carryover to next year.  But I understand that it is possible to pass through the Section 179 deductions to partners so that we can offset the deductions against our W2 incomes.   

How can I do this in Turbo tax? I use Turbo Tax Business to calculate K-1 forms for the LLC and use Turbo Tax Home and Business to file my own personal income tax.

[ChristinaS · Accepted solution]

The loss (before 179) will pass through to your personal return simply by entering the K1 (1065) form. You enter K1 forms in Self-Employed under Personal Income. Because the business is filing an entity return, you don't report much on the personal side- you just key in the K1.

There are limits to whether a business can transfer the 179 loss to you in the current year. If the business is operating at a loss in the current year (before 179), the 179 is not available to you, personally, in 2016. It is being carried over to 2017, which means it won't be available to you until 2017.

You may want to reconsider the 179 if you are trying the maximize the current year loss. Depending on when you placed the equipment in service, normal depreciation may be a nice amount for 2016. Normal depreciation will increase the loss which passes through.

[Jmn091962]

I just noticed that TurboTax has not been reporting my depreciation expense on K1 although I show a profit. This has been happening for the last 4 years. It correctly did it the first time I opened the business 5 years ago. I just noticed it has not been reporting on K1 ever since. Has anybody into this problem and if so, how did you fix it?

[cutiepie127]

I have entered 179 loss from LLC into turbo tax and it does not offset income.  What am I doing wrong?

[RobertB4444]

@cutiepie127  Nothing.  In a pass through entity the section 179 deduction flows through on the K1s instead of being taken at the corporation level.  Check your K1s and you should see it there.