2021 TurboTax Seems to be calculating Section 179 Deduction incorrectly

[ACinco]

I'm eligible to deduct the full value of an improvement in 2021, so I'm taking the full Section 179 deduction. For some reason, TurboTax is calculating that I owe more tax using this method as opposed to depreciating the improvement over several years. This does not seem possible, so I think it may be a glitch in the program. Has anyone else experienced this?

[ThomasM125]

That can happen if you have an earned income credit. The credit rises as your income rises up to a certain level, so if you report more depreciation it can increase your tax due. When you reduce your business income, that can also reduce your earned income credit, often by more than your tax decreases, so tax due goes up. You can look on line 27(a) of your form 1040 to see your earned income credit, if you have one.

You can view your form 1040 while working in the online version of TurboTax by following these steps:

While working on your return in the Federal section of TurboTax:

   1.  Choose the Tax Tools icon on your left menu bar

   2.  Tools

   3.  View Tax Summary

   4.  Choose the Preview my 1040 on your left menu bar

[ACinco]

There's no amount on Line 27(a) of my 1040, and I don't qualify for the Earned Income Credit.  Is there anything else that could cause the program to do this? I have used the Section 179 Deduction before, and have never had this happen.

[ThomasM125]

There could be another credit or deduction that is affecting your tax. I suggest you look at your form 1040 before and after the section 179 deduction and see what is changing. I assume the tax on line 16 will decrease when you add the section 179 deduction, as your income will decrease. So, you need to pay special attention to the numbers below that to see what is changing.

[Rick19744]

@ACinco do you possibly have a business income limitation which is causing your Section 179 deduction to be limited and carried over?

[ACinco]

I figured it out. I classified the improvement incorrectly, and therefore the program was not allowing the full Section 179 Deduction. Thank you for your help!