Thank you for replying.
We are married filing jointly. I am an active participant in real estate property management, a real estate professional.
My question is not so much how the Section 179 election works, but how Turbotax handles it.
I also wonder why or if it correct that I can elect to use Section 179 to expense an asset, but the same asset is also depreciated. In my case, my new truck cost $68507. I used Section 179 to expense part of the truck cost, the part equal to the net profit on the business. As a real estate professional, the rental property is business. I used Section 179 to deduct $44507-, most of the cost of the truck, but a depreciation deduction of $857 was also generated on the remaining $24,000 (=68507 - 44507). As I understand it, Section 179 elections cannot be used to generate losses, only used against profits. If the Section 179 deduction exceeds the profit for a business then the amount in excess of the profit is disallowed and carried forward to the next year. I expected Turbotax to do the arithmetic, to allow the Section 179 deduction equal to the profit and to disallow the excess for carry over to 2022, but it did not do that. In Turbotax, the entire Section 179 deduction is made and the business has a loss. I think that this is incorrect. At most the business should show $0 profit and the excess deduction carried forward to 2022. The additional depreciation deduction of $857 takes the bottom line for the business below zero, a loss. I thought that I could use the allowable portion of a Section 179 deduction or depreciation, not both. In Turbotax, both the $44507 Section 179 expense and the $857 straight line 7 year depreciation expense are deducted and the business shows a loss. NOTE: this Schedule E Worksheet shows errors (!), so I am not ready to file and have not figured out what I have done incorrectly.
By the way, the Instructions for Form 4562 that you referenced states,
"Line 5
If line 5 is zero, you cannot elect to expense any section 179 property. In this case, skip lines 6 through 11, enter zero on line 12, and enter the carryover of any disallowed deduction from 2019 (which does not include amounts attributable to qualified section 179 real property) on line 13."
"deduction from 2019"? Is that a rare IRS error? Should it not say disallowed deduction from 2020?
