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AndrewG25
Returning Member

Is it possible to use Section 179 deduction from an LLC and include personal W2 income?

Specifically for a new startup that doesn't make any money yet and is operating at a loss, but say I made 100K from a personal job, can I use Section 179 to deduct expenses from that 100K of personal income?

 

6 Replies
AmeliesUncle
Level 11

Is it possible to use Section 179 deduction from an LLC and include personal W2 income?

"LLC" means nothing.  Is this a Partnership (multi-member LLC)?  Is this a Sole Proprietorship (single-member LLC)?  Has the LLC made an election to be taxed as a corporation?

 

 

Carl
Level 15

Is it possible to use Section 179 deduction from an LLC and include personal W2 income?

A single member LLC is considered a disreguarded entity by the IRS. Under no circumstances and with no exceptions does the owner of a single member LLC issue themselves a W-2, 1099, or any other type of tax reporting document.

If you filed form 2552 to have your single member LLC "treated like an S-Corp" for tax purposes, then from the income tax point of view, you don't have an LLC. You have an S-Corp. The rules are completely different for an S-Corp. None of the below applies to an S-Corp.

If your single member LLC was open for business in 2020, then you are required to report it on SCH C as a part of your personal 1040 tax return. Doesn't matter if you had no income.

Any expenses incurred before your single member LLC was "officially" Open for business are claimed as start up expenses in the first year the business is officially open for business. It does not matter in what tax year those startup expenses were incurred either. THe program will ask you for any startup expenses.

 

AndrewG25
Returning Member

Is it possible to use Section 179 deduction from an LLC and include personal W2 income?

It's a single member LLC, but my personal W2 income is from my personal job unrelated to the LLC. I'm starting the LLC this month and plan to deduct expenses with zero income from the business, but my question is can I deduct it from my personal job's income. 

AmeliesUncle
Level 11

Is it possible to use Section 179 deduction from an LLC and include personal W2 income?

Yes, you can (assuming the assets qualify for Section 179).  I asked you that because MY answer depended on YOUR answer to how the business was taxed .

 

However, do you WANT to do that?  In most cases it is NOT the best long-term thing to do from a tax viewpoint.  Yes, taking the full deduction this year will save you more income tax this year.  But if you use 'regular' depreciation, that would push much of the deduction to future years.  If you do that, it will save both income tax AND self employment tax in those future years (assuming the business is profitable), resulting in more overall tax savings.  Actually, I generally recommend doing the opposite of what you are asking about; you should take the SMALLEST amount of depreciation that you can by using Straight-Line depreciation (but that would require some manual entries in TurboTax).

AmeliesUncle
Level 11

Is it possible to use Section 179 deduction from an LLC and include personal W2 income?


@AndrewG25 wrote:

 I'm starting the LLC this month and plan to deduct expenses with zero income from the business, 


 

Wait a second.  You are STARTING the business THIS month (May 2021)?  Taxes are done on an ANNUAL Basis.  So if you are starting the business this month, it seems likely that you WILL have income for 2021, won't you?

AndrewG25
Returning Member

Is it possible to use Section 179 deduction from an LLC and include personal W2 income?

Correct, I am starting the business May 2021, plan on purchasing a SUV (6000lbs+) in December 2021 and my question is for when I file taxes in 2022. I'm not sure if I will have any income from the business in 2021, that is expected in 2022. My income for 2021 is mainly through my personal job, which I want to deduct from. 

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