Sec. 179 depreciation limited to taxable Business Income

Apr 05, 2009 3 Replies
W

I thought I understood this completely, but now I'm wondering. All other limits withstanding, I was under the impression that if a business grossed $50K, then it could expense up to $50K of depreciable property in the year of that purchase. Now I'm wondering if I should be looking at the business net income before §179 depreciation is taken as the proper limit.



I know that according to Pub. 946, charitable contributions can come into play, but not an issue in my situation.



The reason is that I want to take more than the $25K of 179 that I can take for Maine in order to lower my fed. liability and then deal with the excess



179 later. Sorry if I'm unclear & thanks.
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A

Your S 179 allowance is limited to net earned income but that includes wages and even net income from another unrelated business.

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W

sometime in the recent past Arthur Kamlet posted this:

Thanks. So to the net income on Sch. C (before the S 179) adds to wages on

1040 ln. 7. How about 1040 ln. 14 (especially from 4797) and Rental income (non-passive) from ln. 17?

I'm using Taxcut which gives me a 'Data Verification warning' that my S 179 'appears to exceed your taxable income from all sources' and may or may not need to be corrected.

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D

The statute says NET business income of the TAXPAYER, not the business.

Not for an individual: Contributions are always non-business expenses.

The gain on the sale of a business asset is business income. Real estate rental income is not.

Note that the computation of business income is without regard to Section

179. Therefore, if one has a home office (280A) where there's a carryforward (when section 179 were to be included at face value) that exceeds the 179 amount, there is no 179 deduction (because the 280A amount carried comes out as a current year expense, leaving a net business income of zero or less).
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