Applying section 179 carryover

[zapt98]

I have a section 179 carryover from my sole proprietorship. What income in future years can it be applied against? Only business profits from the same or other businesses? My business is already showing a loss, but I have oil royalty income every year (a profit) that I'd like to apply the carryover against. After doing so during Easy Step, the Federal review reports the amount as an error that I must correct. Is that because I'm applying it against an inappropriate income source?

Anyway, I'm thoroughly confused. I can't find any explanation of what income I can apply a section 179 carryover against.

[JamesG1 · Accepted solution]

I assume that the oil royalty income is a passive investment and does not derive from the active conduct of a trade or business.  The royalty income would likely not be eligible to be offset. 

The total cost you can deduct is limited to your taxable income from the active conduct of a trade or business during the year. You are considered to actively conduct a trade or business only if you meaningfully participate in its management or operations. A mere passive investor is not considered to actively conduct a trade or business.

A Section 179 carryover occurs when a business cannot fully use the available deduction due to specific limitations. One common reason is the taxable income limitation. If a business’s taxable income is too low to absorb the entire deduction, the unused portion carries over to future years. This allows businesses to eventually benefit from the deduction without exceeding taxable income.

See this TurboTax Help.