Section 179 second year

I think what you mean is you entered a business vehicle on your 2019 tax return and deducted $18,000 of depreciation by taking section 179 or bonus depreciation. If so, you may have additional depreciation to take in 2020 if the vehicle cost more than $18,000. You should have entered the full cost of the vehicle in 2019.

The depreciation in 2020 could be left-over section 179 from 2019, but is sounds like you took the full amount allowed in 2019. If so, then there would be additional depreciation that TurboTax would automatically enter on your tax return in 2020, but it would be less than the $18,000 amount.

You can only take section 179 or bonus depreciation in the year you purchase the vehicle. The amount allowed in that year may not all be used in that year, based on your business income, so you may have some carryover to future years.

Sorry for being confusing, we did enter the full purchase amount, and took the full $18,000 for 2019.  We thought there would be the additional bonus depreciation but Turbo tax does not even address that with the questioning, nor will it allow me to enter numbers into the Forms section.  

No, you have already taken the full cost of the truck. There is nothing left for you to depreciate.

but out of a $60,000 truck purchase, we only got $18,000 for that first year

So, the value is higher than the $18,000. The balance will be depreciated over 5 years with regular depreciation. 

From IRS Form 4562 instructions:

For qualified property (defined below) placed in service during the tax year, you may be able to take an additional special depreciation allowance. The special depreciation allowance applies only for the first year the property is placed in service. The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under the modified accelerated cost recovery system (MACRS).

thank you. 

I guess we are still a little confused, though, as we read this online

"You can use both Section 179 and bonus depreciation in the same year. With 179, you can split the cost between years if you choose. For example, you could deduct half of the cost upfront and spread the rest over the next five years."

If they are saying we could deduct half of the cost upfront, why was there a cap at $18,000 for that first year?  We also thought we would have the next year with a deduction of $18,000.

sorry, amateurs here.

Let me help, my answers are italicized.

"You can use both Section 179 and bonus depreciation in the same year. Yes, the year purchased

With 179, you can split the cost between years if you choose. Yes, if your vehicle had cost less than $18,000, you could split and put some of it sec 179 and some depreciation. In your case, your truck was over $18,000.

For example, you could deduct half of the cost upfront and spread the rest over the next five years." Yes, if you had purchased a $30,000 truck, you could have done a sec 179 for $15,000 and depreciated the rest over 5 years.

The year you purchased the truck, you could have both sec 179 and depreciation. Your sec 179 maxed out at $18,000. The IRS puts a cap on vehicles for the sec 179. After the first year, you depreciate for 5 years. Sec 179 is a one time event, in the year of purchase.

whew....thank you.  this helps. We had received varying accounts as to this deduction before we purchased the vehicle, and obviously, incorrect info.  Appreciate you taking the time to further dissect, Amy and Colleen

Thank you, Yes, we did enter the full cost of the vehicle in 2019. We just were under the impression it would allow an additional $18,000 for 2020 as well.  

It has been a year since you posted your answer, but our question is similar.

I bought a truck in 2021 for property management.  I want to use a Section 179 deduction against the profit for one building on my Schedule E.  The truck cost more than the net profit for the property for which I am trying to make a deduction.   I am trying to use the Section 179 deduction to offset the net profit for one property and to carry the remaining truck depreciation forward to future tax years.  No matter what I try, I get a value of "0" depreciation in Turbotax.  What am I doing wrong?  I expected the Section 179 deduction to appear in "Assets / Depreciation".  I expected the portion of the deduction that exceeds the building profit to be calculated, too, but perhaps that is expecting too much.  All I see in the worksheet is a treatment of the truck as 7-year property and no Section 179 deduction.

There are two issues which might be affecting the section 179 deduction on your tax return.  Both are discussed in this IRS publication.

Page 3 Line 5

If you are married filing separately, you and your spouse must allocate the dollar limitation for the tax year.

Page 4 Line 11 

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.

@HR30

Thank you for replying. 

We are married filing jointly.  I am an active participant in real estate property management, a real estate professional. 

My question is not so much how the Section 179 election works, but how Turbotax handles it. 

I also wonder why or if it correct that I can elect to use Section 179 to expense an asset, but the same asset is also depreciated.  In my case, my new truck cost $68507.  I used Section 179 to expense part of the truck cost, the part equal to the net profit on the business.  As a real estate professional, the rental property is business.  I used Section 179 to deduct $44507-, most of the cost of the truck, but a depreciation deduction of $857 was also generated on the remaining $24,000 (=68507 - 44507). As I understand it, Section 179 elections cannot be used to generate losses, only used against profits.  If the Section 179 deduction exceeds the profit for a business then the amount in excess of the profit is disallowed and carried forward to the next year.  I expected Turbotax to do the arithmetic, to allow the Section 179 deduction equal to the profit and to disallow the excess for carry over to 2022, but it did not do that.  In Turbotax, the entire Section 179 deduction is made and the business has a loss.  I think that this is incorrect.  At most the business should show $0 profit and the excess deduction carried forward to 2022.  The additional depreciation deduction of $857 takes the bottom line for the business below zero, a loss.  I thought that I could use the allowable portion of a Section 179 deduction or depreciation, not both.  In Turbotax, both the $44507 Section 179 expense and the $857 straight line 7 year depreciation expense are deducted and the business shows a loss.  NOTE: this Schedule E Worksheet shows errors (!), so I am not ready to file and have not figured out what I have done incorrectly.

By the way, the Instructions for Form 4562 that you referenced states,

"Line 5
If line 5 is zero, you cannot elect to expense any section 179 property. In this case, skip lines 6 through 11, enter zero on line 12, and enter the carryover of any disallowed deduction from 2019 (which does not include amounts attributable to qualified section 179 real property) on line 13."

"deduction from 2019"?  Is that a rare IRS error?  Should it not say disallowed deduction from 2020?

"deduction from 2019"?  Is that a rare IRS error?  Should it not say disallowed deduction from 2020?"

Yes, that is a typo. The carry-over would be from the previous tax year, so in this case 2020. 

On Form 4562 Section B only shows General Depreciation.

You need to go down to Pat V Section A Line 26 to view the Section 179 Deduction if selected. 

If you have the Desktop program, look at the Depr Report" (Depreciation and Amortization Report. 

Thanks again for your reply.

I wrote, "In Turbotax, both the $44507 Section 179 expense and the $857 straight line 7 year depreciation expense are deducted".  I was incorrect.  Turbotax did not use S/L but MQ as the convention.  Turbotax used a 7 year recovery period on the $24000 Section 179 disallowed portion of the truck cost, "MQ" as the convention and 200DB as the method to calculate $857 in depreciation in addition to the $34507 Section 179 write-off. 

While on the subject of Section 179, what is "special depreciation", reported in Part II of Form 4562?  Are there not enough methods of depreciation without calling one "special"?

In my form 4562, yet to be filed, Part V section A is blank.  The Section 179 deduction appears in Part I.  For the Form 4562, Line 12 Smart Worksheet

(A), Total Section 179 before limitation should be the total cost of the truck, $68507, but it is auto-filled as $34507, the amount I typed, and 

(B) Section 179 allowable, if different is $34507.

It seems to me that the Turbotax generated entry for (A) is wrong, but maybe I am wrong.  It seems I can use Section 179 to justify a deduction of any amount up to the entire cost as long as the cost is below $1,050,000 or the net profit of the business in which the asset is used, whichever is lower.  Are this autofilled entry correct entries and if not do you know how to correct them?  It seems that I cannot use Turbotax to change entries on forms, only on worksheets.

I guess that Turbotax would allow me to use Section 179 to deduct more than what the IRS would allow, which is the entirety of the profit for a business.  Again, it is my understanding that a Section 179 deduction cannot exceed the net profit of the business in which the asset is used.  Rather than calculating the maximum allowable Section 179 deduction,  Turbotax seems to allow me to deduct in excess of the net profit and thereby show a loss, which I believe the IRS would disallow.  Is my observation correct?

To clarify, what was the profit of your business before expenses were added? Was it $34,000? Also, were there other expenses besides the 179 deduction?

@HR30

Hi, Thanks for replying.

The profit for the business, one of my rental properties, after other expenses and before the truck Section 179 election of $34507 was about $45000- and about $10,000 after the Section 179 deduction. 

As it ends up, as I went through my tax filing within Turbotax, the Section 179 deduction election apparently was not allowed against rental income even though that rental property is part of a qualified business enterprise.  In my case it seems that the Section 179 deduction was only allowed against my Schedule C income, which for me is property management income.

I had to pay myself enough in property management fees, an additional $34507,  to cover the $34507- Section 179 deduction for part of the truck cost from Schedule C income.

As far as I know, Section 179 elections for tools and equipment and vehicles, etc. can only be made against income generated by the relevant business.  For example, Section 179 elections may not be made against unrelated income, such as capital gains for selling stocks.

Also, as far as I know, Section 179 deductions may only be made to the point of deducting profit down to zero and may not be used to generate losses.  Part of a Section 179 deduction that would take the bottom line below zero, that would generate a loss, would be disallowed.  What is not clear is if Section 179 deductions are the first made or the last made.  In other words, if a Section 179 deduction is made first and the business still has profit then may other deductions for expenses be made that would leave a loss?  Or, if other deductions for expenses are made first and the business still has a profit then may a Section 179 deduction be made that would only take the net profit down to zero.  It seems to me that if a Section 179 deduction is being made then the business may not report a loss because Section 179 deductions may not be used to generate losses.

Intuit states that Turbotax does not support all Section 179 deductions:

"Taxable Income Limitation for Section 179 (Form 4562): If you have a trade or business loss
subject to the at-risk limitation (Form 6198), the program uses the unlimited loss to compute the
taxable income limitation for section 179 on Form 4562, line 12.
This would affect your return only if you also had trade or business income from another activity. In
this case you may need to adjust the taxable income on Form 4562: Depreciation Information, line 3b
to reflect the limited loss. If you are reporting a trade or business activity on Schedule E or Form 4835
that qualifies for the Section 179 expense deduction, enter the net income on the Depreciation
Options Worksheet, line 3b, for it to be included in the Section 179 limitation calculation."

Turbotax is too awkward for me to figure out how to report this deduction properly and according to the guidance above.  In my previous reply, I described how I made my Section 179 expense deduction against property management income (Schedule C) rather than against a rental property on Schedule E.

Form 4562 / I have carry over depreciation that is not carrying over to last year 2021 from 2020 into special depreciation.  I have used the five year depreciation for renovations to my rental property in the amount of $18,191.  under Part !1 Special Depreciation. The calculation are completed in Form 8582 yeilding a maximum depreciation allowable of $25,000 that should be part of my overall cost reductions / and tax reductions under worksheet 6 I never had this problem before and 

None of this pertains to any vehicle or one time bonus.  I have NO $18,000 deduction for vehicle or need for Section 179 does not apply.  How do I correct this and get credit for one time improvements in 2021 of $8590 written off in one year as expenses and capture my carry over Special Depreciation from previous years of $18,191 for reduction of income / taxes? Very frustrating.

Bad answer as I just wrote there is no vehicle for $18,000 and no bonus depreciation relative to Section 179. 

I failed to take the huge depreciation on the company vehicle in 2019.  The 5 year mark will be in 2023.

This years depreciation is only $406.  How do I record the difference in the depreciation that can be taken?

Can I record it on the books as a Credit to Accumulated Dep. and Debit towards Retained Earnings.  Since I 

can't go back and amend that many books. What do I do and how do I record it.

Thank you,

Jan

For tax purposes, you would have to file Form 3115 (Change of Accounting Method) in order to tax the missed depreciation from 2019-2022.

Form 3115

@htstucco 

Are you sure....  How do I change accounting method to record the Prior depreciate to balance the correct depreciate that should have been taken.   I do not want to expense that amount and was wondering could I

record the correct (accumulated depreciation) to my books and put the difference in retain earnings?

Thanks,

Jan