Schedule C: Sec 179 is too large

[lostone2]

Hi, during the review analysis I got an error in Schedule C which took me to line #34 in Part VI - Vehicle Depreciation Information.  I purchased a Heavy SUV for $72,983 and put it 100% into service for my business on October 2024, but the business unfortunately operated at a loss in 2024 (negative net income). 

I had put $72,983 in line #34, which gives me an error stating that this amount "cannot be greater than the limit shown below."  However, I do not see a limit anywhere "below."  If it's because I'm at a negative income for the year, what amount am I supposed to put in line #34, and where would this vehicle purchase be reflected if not here?  Not sure if it matters, but my business (which is negative) plus my W2 is greater than $72,983.   

[Mike9241]

your suv has a 179 limit of $30,500 for 2024

after the 179 deduction, you get a special depreciation and a regular depreciation deduction. since the vehicle was put into service in the 4th quarter, the regular depreciation deduction is figured using the mid-quarter convention  (MQC)  The MQC applies when 40% or more of the cost of depreciable assets is put into service in the 4th quarter 

your 179 limit is the lesser of the above or your net business income.

your Schedule C business income is determined before the 179 deduction. your wages (box 1) are business income for purposes of the 179 deduction. 

so the max depreciation assuming MQC applies is

72983 - 30500 =42483 special depreciation is 60% of this so an additional 25490 leaving 16993 and 5% of this (MQC %) 850. in total, if my math is correct, 56840

[MODS] there seems to be a bug in the vehicle depreciation schedule because the limit is not showing up  for a heavy SUV 

[lostone2]

Thank you for your response but I'm still a little confused about this section, and there was a whole lot there in your response that the software did not mention nor help with calculating. I thought TurboTax is supposed to make things simple for non-tax experts, but it appears there is not enough information or support through the software to properly complete this section. I'm almost to the point of throwing in the towel with TurboTax and just go see a tax consultant this year, because I really want to make sure I get this part right.  Even if I have to carry this deduction forward to future years, I want to make sure I'm entering the right information during this filing. Let me try this just once more. Here is my info:

*Line 23:  SUV (7,500lb GVWR) OTD purchase price was $72,983; put into service mid-October 2024 (approximately 2.5 months of 100% business use in 2024).

*Line 24:  Total actual expenses (Vehicle purchase price, fuel, insurance, maintenance) was $73,549.

*The total net income for my business in 2024 was negative ( - $4,058).  

*I also have W2 income so my combined income (-$4,058 + W2 salary) exceeds Line 24.

What should I be entering under Section 179 Deduction (Line 34)? Do I also check the box for "I'll take the special depreciation allowance?"  

[lostone2]

.

[PatriciaV]

Because your business reported a loss, any Section 179 deduction you claim will be carried over until you have income to match against that deduction. Enter the limit of $30,500 as explained by Mike9241 and see if that passes the form review.

Special "Bonus" Depreciation (60% of the balance after Section 179 for tax year 2024) will increase your passive loss for this activity, which will also be carried over until you have income in a future year.

[lostone2]

@PatriciaV / @Mike9241:

I connected over the phone with a TurboTax Expert a few days ago and she advised me to take just the regular depreciation. She told me to leave line #34 blank (bypassing my ability to utilize section 179 now or even in the future on this vehicle).  She also said to mark "no" on taking the special depreciation.    

Doing the above appeared to "increase/maximize" how much I'd pay in taxes compared to entering $30,500 into line #34 (sect 179) and checking the box "yes" for taking the special depreciation.  There's a huge difference of over $14k in taxes I'd pay or get back.

Either entry would pass the form review and allow me to complete my e-filing, but which is right? I don't want to pay more taxes than I have to, but also don't have the time to waste getting audited unnecessarily. Please advise.    

[AmeliesUncle]

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@lostone2 wrote:

I'm almost to the point of throwing in the towel with TurboTax and just go see a tax consultant this year, because I really want to make sure I get this part right. 

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That is definitely your best option.

You only gave us minimal information about your vehicle, but as others mentioned, for SOME vehicles Section 179 is limited to $30,500

[lostone2]

@AmeliesUncle  what vehicle information is still needed? As mentioned in my original post, it is classified under Heavy SUV (not luxury vehicle). Cost was 72983, and was used 100% for business last quarter. 

[AmeliesUncle]

Do any of these apply?

• Designed to seat more than nine passengers behind the driver's seat;

• Equipped with a cargo area (either open or enclosed by a cap) of at least 6 feet in interior length that is not readily accessible from the passenger compartment; or

• That has an integral enclosure fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.

https://www.irs.gov/publications/p946#en_US_2024_publink[phone number removed]

If none of those apply, the Section 179 is limited to $30,500.

[lostone2]

None of those apply and it was understood that the limit would be $30,500 for sec 179 after Patricia’s response above.

As recently mentioned right before your first response, entering $30,500 into line #34 passes the form review, but a TurboTax expert over the phone advised not to take the special depreciation and leave line #34 for sec 179 blank, which also passes the form review.

Which direction is correct?

[AmeliesUncle]

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@lostone2 wrote:

a TurboTax expert over the phone advised not to take the special depreciation and leave line #34 for sec 179 blank, which also passes the form review.

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While you don't NEED to claim Section 179 or the Special Depreciation Allowance, the phone advisor was merely directing you to the path of least resistance (the lease likely to result in a program error), rather than what is best for your personal situation.  

I don't know your entire situation (which is why I said going to a good tax professional is your best option; using Do-It-Yourself software like TurboTax often results in a poor outcome), but it sounds like either direction is allowable.   Which one is best for your personal circumstances will vary depending on the details of your personal circumstances.