To consider the pros and cons of accelerating vehicle depreciation, please note that if the actual expenses, including depreciation, are claimed in the first year of business use for the vehicle instead of using the standard mileage method, then only the actual expenses are used the entire time you use the vehicle for business.
If instead you use the standard mileage the first year, you can choose over the life of the asset between the actual expenses or the standard mileage rate method each year.
TurboTax recommendations regarding Section 179:
Taking the 179 deduction enables you to increase your deductions in the year you place a property in service, and thus decrease your net income. If your business is operating at a profit, it is to your advantage to claim the section 179 deduction so that you get the maximum allowable deduction to decrease your tax liability. Since cash flow is so important to small business owners, taking the deduction is a great way to reduce your cash outflow by decreasing your tax liability.
Your total section 179 deduction for 2020 is limited to $1,040,000, so if you place several assets in service in a certain year, it may be better to take the regular depreciation deduction for certain items.
You can only take the section 179 deduction to the extent of your net income for the year. If you try to take the deduction for a year in which you have a net loss, you will simply carry the deduction forward indefinitely until you show a profit.
Reminder: In future years, if your business use percentage drops to 50% or below you no longer use the asset in your business, you may have to report the section 179 deduction as income. This is known as recapture.
The IRS can garnish a refund for back taxes, not the Section 179 deduction specifically. For more information, see:
Who Can Garnish an Income Tax Refund? - TurboTax Tax Tips & Videos
Federal Guidelines for Garnishment - TurboTax Tax Tips & Videos
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For more information about depreciation, see: What is a Section 179 deduction?
Depreciation of Business Assets - TurboTax Tax Tips & Videos-which includes information about Section 179 and the special depreciation allowance, or bonus depreciation.
Section 179 will be encountered when entering the Business Asset. The Section 179 option will be available after entering the cost of the asset. Follow through the interview and TurboTax will explain the Section 179 option and special depreciation allowance options.
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