4th quarter business expense is greater than rest of the year

[TBF205860]

Does having a business expense greater than previous 3 quarter's expenses alter how you do deductions? (the expense being a new computer and gear —if purchased after Oct. 1 does this mean I have to depreciate vs deducting whole purchase value at once for the year?

[Anonymous]

you can use bonus depreciation to fully depreciate the items or you could also use section 179 depreciation to the same effect assuming you have enough business income (income before the 179 deduction).  you didn't provide enough info to say whether or not just taking a direct expense deduction would raise any red flags with the IRS.    the safest course is using a depreciation method noted above which will obtain the same bottom line as a direct write off. 

[TBF205860]

The expense would be a long term assets used only for business (no personal use) and cost between 10-20% of total income for the year. Other expenses from the previous 3 quarters are less than 80% of new expense. I would prefer to take a direct deduction for the year vs to depreciate but missed the 3rd quarter deadline. Does the above provide enough info to determine if a direct method in the 4th quarter would raise any red flags? Is there a limit for direct deduction of $2,500?

[Critter-3]

I think you are referring to the Mid Quarter depreciation rules ... if you use the bonus depreciation or the 179 deduction  then the MQ rules do not come into play. 

[TBF205860]

Thanks @Critter-3 for your reply, I'm learning as I go so thank you for your patience! I looked into the 3 options you mentioned:

Mid Quarter depreciation - if the total cost basis of business equipment placed in service during the last three months of the tax year exceed 40% of the total basis of all the property placed in service during the year.

179 deduction - allows businesses to take an immediate deduction for business expenses related to depreciable assets such as equipment, vehicles, and software.

Bonus depreciation - based on tax rate ( Equipment covered by the Section 179 deduction might also qualify for bonus depreciation, which further reduces the business owner's tax bill.)

I guess I'm still confused on:

1. If you fall under the MQ rules (40%) can you can still elect to take the 179 deduction/bonus depreciation? or would I have to wait until Q1 of next year to do so?
2. Is bonus depreciation (based on current tax rate) applied in addition to the 179 deduction (100% of the purchase price)?

[Critter-3]

If you fall under the MQ rules (40%) can you can still elect to take the 179 deduction/bonus depreciation? or would I have to wait until Q1 of next year to do so?  Each tax year stands on it's own. And election is made on an asset per asset basis as they are placed into service. 

Is bonus depreciation (based on current tax rate) applied in addition to the 179 deduction (100% of the purchase price)?  One or the other is taken ... you cannot take all options.  The bonus depreciation is taken for the full cost on ALL assets in the same class.  The 179 deduction can be taken on each asset separately.  

So you could take the bonus depreciation on all assets that are 5 year properties and then choose a 179 deduction on a 7 year property.  

This section of the tax law is the only place you can legally play with your bottom line ... learning to play the game and make the correct choice for you not only this year but going forward is a good reason to talk to a local tax pro and get educated.  A DIY program will not give you the tax planning advice you need to make an educated decision.