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tergicristallo
Level 1

Section 179 no income

Hi,

 

I'm planning to start an online business on the side and buy some computer equipment and furniture which I will be using exclusively for business purposes. Can I expense these purchases under Section 179 even in the case I don't make any income from the business (or I make less then what I paid for the equipment) ? I still have income coming from my regular job and I will still be filing as married jointly.

 

Thanks

3 Replies
Carl
Level 15

Section 179 no income

Understand that SEC179 is not an "expense" in the sense you may think it is. The SEC179 deduction is a method that allows you to depreciate business assets 100% in the first year of business. This is only beneficial if you actually have the taxable business income to depreciate such assets against.  Whenever you sell or otherwise dispose of such assets, the depreciation has to be accounted for in the tax year of sale or disposition. So if you fully deducted the cost of an asset under SEC 179 in that first year, and then you sold it the next year, your cost basis on that asset would be $0. That means that whatever you sold it for would be considered taxable income. If you donated the property to a qualified charity, then your donation value would be $0, since you would have already taken a deduction for the cost of the asset under SEC 179.

Additionally, business assets that cost less than $5000 and are not classified as real estate (along with a few other criteria) can just be expensed. Period. Nothing to do with depreciation or SEC179. You just write them off as a business expense under IRC section 263(a) and you're done with it forever. This is referred to as safe harbor de-minimus. You ca read about it at https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations. Note that if you take the de-minimus deduction you will not be able to e-file the return for that tax year, as you are required to mail it in along with a statement of what you're doing.

 

martinmarks
Level 10

Section 179 no income

I still have income coming from my regular job

That income can be used to support a Sec 179 deduction as it's considered active or earned income. So you take the deduction even if your business has no profit or net income to the extent you have earned income from your job.

martinmarks
Level 10

Section 179 no income

You just write them off as a business expense under IRC section 263(a)

That section requires that assets be capitalized......the final tangible regs are what allows certain assets to be expensed.

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