Discussion:Section 179 limitations
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Discussion Forum Index --> Tax Questions --> Section 179 limitations
| 7 February 2006 | |
| It seems by the way the software works and looking at the rules this year, Section 179 deductions may be taken even if it/they bring a business into a loss. It appears the limitation is on All income, not just the specific business. In other words, $80K salary, $12K loss on farm, but new tractor of $22K can be expensed using Sec 179 because the remaining net income of $68K supports it. Is it true? | |
| 7 February 2006 | |
| The net income limitation is based on all business income of the taxpayer (including wages) as long as the loss did not come from a pass-through entity. | |
| 7 February 2006 | |
| Have I missed something, or is this a fairly new 'netting' of income? | |
| 7 February 2006 | |
| Wages could always be used if a schedule C or F had a loss. | |
| 11 July 2007 | |
| SCorp has officer salary of $15k and ordinary bus. income of $5k. Sec 179 in the amount of $30k.
On the 1040, there are the $15k officer salary and wife's Sch C income of $25k. I know the Sec 179 is not limited by the officer wages and the SCorp income, but not sure about the wife's Sch C. Can you advise? Thanks | |
Death&Taxes (talk|edits) said: | 11 July 2007 |
| That counts too. The officer/shareholder wages plus S income permitted up to 20K of 179 on the 1120S, then on the 1040 the wife adds to the limit. Note that the officer must be a shareholder receiving a K-1 at S Level. | |
| 11 July 2007 | |
| Yay! For a guy with a moniker like "Death and Taxes", you sure give good news! | |
| 9 August 2007 | |
| I have a client that has no earned income.
He has substantial capital gains, portfolio, and income from limited partnerships (passive). One of the K-1's has a Scetion 179 amount on the K-1. The software is not permitting the Sec. 179 expense because there's nothing on line 11 of from 4562. Any thoughts? Thanks | |
| 9 August 2007 | |
| Yes, my thought is "Why are you depending on the software to know more than you?" | |
| 9 August 2007 | |
| Your software is correct. One must have profit from a trade or business at least equal to the 179 claimed in order for it to be deducted. Since there is not business profit, the 179 is carried forward. For the purposes of Section 179, wages is included in trade or business income, but your client has no wages either. | |
TaxAssistCPA (talk|edits) said: | 10 August 2007 |
| I have a client with several LLC's (1065 K-1's). On two of them, there is enough income to 'cover' the 179 deductions - i.e., each of the two K-1's have income in excess of their respective 179 deductions. The other K-1's have losses and there is also an S-corp K-1 with a loss. All activity on page 2 of Sch. E nets to a nonpassive loss. This nonpassive net loss swallows up the token W-2 income. Is all earned income (in this case a loss) considered when evaluating whether the 179 is permitted - (or) - is it just the activities from where the 179 deductions come (which are income amounts)? Thanks. | |
Death&Taxes (talk|edits) said: | 10 August 2007 |
| Think about it: if 179 can be allowed in a scenario where wages more than cover losses, surely it must work in the opposite direction too. It sounds like the 'active trade or business' rule is working to your detriment. | |
| 10 August 2007 | |
| Section 179 is limited at the company level by the business income plus officer wages and then limited again at the 1040 level to earned income. | |
Death&Taxes (talk|edits) said: | 10 August 2007 |
| The phrase is 'active conduct of a trade or business', Sec. 179 not 'earned income' thus income from an S Corp could be offset by the 179. The best source on this board for this area is the immortal Discussion: Partner Section 179 Expense Deduction | |
TaxAssistCPA (talk|edits) said: | 12 August 2007 |
| I guess I was just loosely using the term 'earned income' because it includes W-2 income - which, of course, W-2's are considered 'trade or business'.
So, D&T, you don't see any scenario in which my client could use the 179? I don't want to be obtuse, but the ProSeries diagnostic gave the impression that there was a way. What am I missing? Thanks. | |
| 2 April 2008 | |
| just to be sure. S-Corp shows losses (before sec 179 and no officers/shareholders salaries paid)
Then...no sec 179, even if could be of benefit to shareholders other income | |
| 30 April 2008 | |
| What if your client places in service greater than $400,000 annually (the limitation) do you have the election not to include that as Section 179 propterty - if he/company acquired 600k in sec 1245 assets? | |
RoyDaleOne (talk|edits) said: | 30 April 2008 |
| What purpose would be served by the limitation on Section 179 property if you could elect some property out of that classification? So I guess the answer is no.
Now for a caveat, this may not be a complete answer and is not intent to be a complete dissertation on the matter. | |
| 2 May 2008 | |
| In my view, Section 179 is not part of Section 179D (Deduction for Qualified Energy Efficient Property - Lighting/HVAC/Insulation) that is, 179D does not provide for a limitation - where 179 does. Any comments on this? | |
RoyDaleOne (talk|edits) said: | 2 May 2008 |
| Extension of the energy-efficient commercial buildings deduction (IRC section 179D). Current law allows taxpayers to deduct the cost of installing energy-efficient improvements in a commercial building. The deduction equals the cost of energy-efficient property installed during construction, with a maximum deduction of $1.80 per square foot of the building. In addition, a partial deduction of 60 cents per square foot applies to certain subsystems. The deduction applies to property placed in service prior to January 1, 2009. The bill extends the deduction to property placed in service through December 31, 2009, increases the maximum deduction to $2.25 per square foot, and allows a partial deduction of 75 cents per square foot for building subsystems. | |
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