laptop as an asset that created a section 179 and a 5yr depreciation.

[Linda C-C]

Last year I entered a laptop as a asset although it was less than $2500 and it created a 5yr depreciation section 179.  This was a mistake, thought it would be a expense due to being less than 2500. This year, I need to remove it as a asset and create an expense because the laptop will never last 5 years and I will retire from my business in 2 years.  How can I correct this?

[DavidD66]

If you set the laptop up as an asset on your 2021 tax return, and elected to expense using Section 179, you would not receive a deduction unless your business otherwise had a profit.  You would also have to have taxable income on your personal return to take the deduction.  You can't remove as an asset added in 2021 and expense it in 2022.  You will have to file an amended return and expense it in 2021.

[Linda C-C]

If I set it up as an asset in 2021 can I change it to an expense in 2022?  I have profit  and will pay personal taxes in 2022.

[DianeW777]

No.  Once an asset is placed in service for depreciation you cannot change it in a future year unless you amend the original return.  However, if you did not use Section 179 in 2021, you can amend your 2021 tax return to use that election for the first year placed in service.  This may provide a refund for 2021 or allow you to carryover the unused Section 179.

See the information from IRS Publication 946 (See: How do you elect the deduction) below.

For property placed in service in 2022 (or 2021), file Form 4562 with either of the following.

Your original 2022 tax return, whether or not you file it timely.

An amended return for 2022 (or 2021) filed within the time prescribed by law. An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. The amended return must also include any resulting adjustments to taxable income.

.You must keep records that show the specific identification of each piece of qualifying section 179 property. These records must show how you acquired the property, the person you acquired it from, and when you placed it in service.

This is the information also explained by our Tax Expert @DavidD66.