Section 179 - Equipment Purchase and Placed in Service Different Years

[adamflyer]

I have a single member LLC and file a Schedule C with my joint return with my spouse.

I thought I had read something a while back that said the purchase and placing into service had to be in the same tax year to use Section 179 but I'm not finding anything.

I purchased used equipment in 2022 for $10k that was not delivered until this year so it won't be placed in service until 2023. Equipment is 100% for business use. My LLC did not have the funds so I made a contribution to the LLC so the LLC could write a check to make the purchase. What should I report for tax year 2022 regarding the equipment purchase? I know I can't depreciate per Section 179 since it was not placed in service in 2022. If I report nothing for 2022, can I then in 2023 (when its placed in service) report a purchase date in 2022 and depreciate per Section 179? I didn't make much in 2022 so it would make more sense to depreciate in 2023.

Is there a preferred method of purchasing assets when your LLC does not have the funds? I have been making a contribution to the LLC by writing it a personal check. When I do this I don't report it as income or anywhere else in the Schedule C right?

Other details:

-In 2023 I made another used machinery purchase for $8k again made possible by making a contribution to the LLC.

-I don't expect much more asset purchases in the near future.

-Income for 2022 was $150k for my spouse and $3k for the LLC.

-I expect < $50k LLC income in 2023 and I'd be lucky to get to $100k in the next few years and as the LLC income goes up I expect my spouse to work less so total income probably won't break $200k anytime soon.

[MinhT1 · Accepted solution]

For the asset to be placed in service in 2023, there is nothing to report on it in 2022. In 2023. the asset can be depreciated or if applicable, deducted under section179.

You apply he same treatment for the machinery acquired in 2023.

Financing your LLC with your own funds is nor reportable on your Schedule C.

You could also finance your asset purchase with a bank loan (if you can obtain one). In this case, the interest paid is a deductible business expense. 

[Mike9241]

@adamflyer in 2023 you have a choice of depreciation options so if you have questions post back when doing that return. you can take 179 but you don't get to deduct it unless you have sufficient net business income, there is special depreciation under 168(k) that provides the same deduction as 179 but is not limited to net business income.  you can skip both if the business income is low in 2023 and you want to preserve some of that deduction for 2024 and later. In other words, if the equipment's depreciable life is normally 7 years you can take anywhere from 5%  (ADS depreciation) to 100% the first year.