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S Corp Equipment Purchase Greater Than Income Better to do Section 179 vs Special Bonus Depreciation vs Depreciate Over Years

If you have an S Corp with an equipment purchase greater than the s corps income for the year is it better to do a  section 179 deduction vs Special Bonus Depreciation vs Depreciate Over Years? Is there a limit on how many years you can carry forward? Can you carry back?

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2 Replies

S Corp Equipment Purchase Greater Than Income Better to do Section 179 vs Special Bonus Depreciation vs Depreciate Over Years

Re the new rules for NOLs see https://www.irs.gov/newsroom/net-operating-losses

 

Note that your S corporation will not have an NOL but, rather, will simply pass an ordinary (business) loss through to you on your K-1. This may result in you having an NOL on your individual income tax return (1040) and that would require further analysis.

 

See https://www.irs.gov/publications/p536#en_US_2022_publink1000177330

S Corp Equipment Purchase Greater Than Income Better to do Section 179 vs Special Bonus Depreciation vs Depreciate Over Years

the 179 limit is computed on your 1040 not the 1120s.  say the S-Corp has a profit before 179 of $30K.  179 is $50K and you took a salary from the S-Corp of $40K. your business income for 179 purposes is the $30K + the salary of $40K giving you business income of $70K which means the 179 would be allowed in full in this example.  this is no carryback.  another consideration is do you have basis for your actual loss. 

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form 7203 was first required for certain 2021 returns

but you might want to use it to see what your basis is for 2019

https://www.irs.gov/pub/irs-prior/f7203--2022.pdf 

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there is no business limitation for Special depreciation, but you still need basis to take the loss.

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179 can be more flexible because you can take 0% up to 100%. the remaining cost is deprecation using MACRS and the class life. if you do not take 100% 179 in the first year you cannot take more in ensuing years 

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it's really a matter of how you want our taxes to come out subject to any loss restrictions due to basis limitations. 

 

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