Section179? what is eligible section 179 property?

[MeganS]

To qualify for Section 179 deduction, the asset must be:

• Tangible;
• Purchased, not leased, for use in your trade or business;
• Used more than 50% in your trade or business;
• Placed in service (purchased, acquired, or converted to business use) during the current tax year; and
• Acquired from a non-related party.

You cannot claim a Section 179 deduction for:

• Real property (e.g., land, building, sidewalks, landscaping, parking lots);
• Income-producing real property;
• Investment property;
• Assets used 50% or less by your business;
• Assets acquired in a tax-free exchange or from a person or entity with whom you share a close relationship as specified by the IRS; or
• Intangible assets such as copyrights or patents.

Section 179 deductions are subject to these limitations:

• You cannot claim a Section 179 deduction for more than $500,000 of the cost of qualified assets placed in service during the year. (The limit for qualified enterprise zone property and qualified renewal community property is $535,000.)
• Your Section 179 deductions cannot be more than your net business income. Section 179 deduction amounts that exceed your net business income can be carried over and used in a subsequent year.
• The deduction amount is reduced if the total cost of all Section 179 assets you placed in service this year is more than $2,000,000. (The $500,000 deduction limit, referenced above is reduced by one dollar for every dollar of total acquisitions in excess of $2,000,000.)

That's a lot of information, but TurboTax Business will check for these limitations as you answer the interview questions.

Advantages and disadvantages of Section 179 deductions

• Taking a Section 179 deduction lets you decrease your net business income by increasing your deductions in the tax year you acquire an asset. If your business is operating at a profit, it's to your advantage to claim the Section 179 deduction.
• A Section 179 deduction can reduce your cash outflow by decreasing your tax liability.
• Your total Section 179 deduction is limited to $500,000 ($535,000 for qualified enterprise zone property and qualified renewal community property), so if your new asset expenses for the year exceed this amount, it's to your advantage to take the regular depreciation deduction on some assets.

Section 179 recapture

You must report the recapture amount of a prior-year Section 179 deduction as income if any of the following occurred before the asset's recovery period (or useful lifespan as defined by the IRS) was up:

• You stopped using the asset in your business
• Business use of the asset fell below 50%
• You sold or otherwise disposed of the asset
• The asset was stolen or subject to a casualty

The amount you report as income is the portion of the deduction that would have remained had you used standard depreciation instead of Section 179. This is known as Section 179 recapture.

For more information, refer to IRS Publication 946, How to Depreciate Property

[mommamari]

my depreciation of my car.  i did not use my car for business this year as I closed the business.

[JamesG1]

@mommamari

Your vehicle does not qualify if it was not purchased in the current year.

To qualify for a Section 179 deduction, your asset must be:

• Tangible. Physical property such as furniture, equipment, and most computer software qualify for Section 179. Intangible assets like patents or copyrights do not. Buildings and land also don’t qualify, although some equipment attached to the building does, including things like fire suppression systems, alarms, and air conditioning units.

• Purchased. Leased property does not qualify.

• Used more than 50% in your business. An asset that is primarily for personal use but occasionally used for the business isn’t eligible.

• Not acquired from a related party. This includes siblings, spouses, parents, grandparents, descendants and businesses, trusts, and charitable organizations with which you have a relationship.