Bonus 168 Depreciation, and Section 179 Depreciation

[JKCPA]

I am curious to know if you can use section 179 deprecation on a portion of an asset and then bonus deprecation the rest.

For example, (S-Corp) if an asset is $100,000, can I 179 $70,000 of it, and then bonus $30,000 of it?

The problem with bonusing the whole $100,000 is that I believe that it all goes to the person's 1040 which would bring their AGI to 0. If I bring the AGI to $0.00, then I do not get to take advantage of the person's standard deduction, so they are losing out on $25,100

Another note to add, I know if there are more than one class of equipment, I can elect to bonus one class and then elect out of bonus for the other class, and 179 depreciation that. There is musical equipment which I believe has a 5 year class while the furniture is a 7 year class, so I believe I could allocate 168 and 179 in this situation. Please correct me if I am wrong.

Thank you.

[tagteam · Accepted solution]

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@JKCPA wrote:

For example, (S-Corp) if an asset is $100,000..........

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S corporation = You need guidance from a local tax professional and/or a tax advisor.

Generally, the Section 179 deduction is limited to income on your 1120-S whereas bonus depreciation (the special depreciation allowance) is not so limited.

As a result, taking bonus depreciation can result in your K-1 (1120-S) showing an ordinary loss on Line 1 of your K-1 (which will serve to reduce your income on your 1040).

The Section 179 deduction is passed directly through to you (and any other shareholders) on Line 11 of your K-1 (which will also reduce your income on your 1040, but is limited at the corporate level).

Bottom line here is seek guidance from a tax professional.