Are you able to use Section 179 Depreciation deduction if your business had a loss?

Forum|Forum|6 years ago
June 6, 2019
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TurboTax Self Employed Online

Best answer by TaxGuyBill

Sort of. It depends.

Yes, you can claim Section 179. However, whether or not you can use the loss in the current year or if the Section 179 is carried to next year depends on the circumstances.

If the business is a Partnership or Corporation, you can not use a loss with Section 179. If you claim Section 179, it will be carried to the next year.

If the business is a Sole Proprietorship (Schedule C or Schedule F on your personal tax return), claiming Section 179 will be allowed IF there is other 'earned income' on the tax return (such as W-2 wages). If there is not enough 'earned income' for the Section 179 to offset, it will be carried to the next year.

TaxGuyBillAnswer

Employee

Sort of. It depends.

Yes, you can claim Section 179. However, whether or not you can use the loss in the current year or if the Section 179 is carried to next year depends on the circumstances.

If the business is a Partnership or Corporation, you can not use a loss with Section 179. If you claim Section 179, it will be carried to the next year.

TaxGuyBill

Employee

However, I should add that if your Self Employed business has a loss, it may not be a good idea to use Section 179 to offset your Wages. Using regular depreciation (which is would also be used in future years) would offset both income tax AND self employment tax in future years (assuming the business will have a profit in future years).

Rgto

Hi @TaxGuyBill , Why do you say it is not a good idea to use Section 179 to offset my wages and the business has a loss?
I'm a Sole Proprietorship (Schedule C), and this is my first year with the business. I already have a couple of customers and business income, but my business expenses are greater than my business income. I also have a full-time job, and my W-2 wages are at least 8X greater than my business loss. I am planning on buying a Large SUV over 6,000 pounds for business purposes only, and I was thinking of using Section 179, combining my business loss (including 100 % of the car cost) and my other personal job wages, I still have some positive profit at the end of the year. That being the case, would it be better to use section 179? or regular depreciation?

Thanks so much for all your comments and help!

claiming Section 179 will be allowed IF there is other 'earned income' on the tax return (such as W-2 wages).

NagiCPA

Can U explain why it is not a good idea to not take Section 179 to offset Self Employment Wages?

Carl11_2

Employee

Can U explain why it is not a good idea to not take Section 179 to offset Self Employment Wages?

Huh? What wages? If a sole proprietorship or single member LLC the owner of that type of business can not be an employee of that business they own. Under no circumstances will the owner of a sole proprietorship or single member LLC issue themselves any type of tax reporting document. So if the business operated at a loss for the tax year, there is no SE tax assessed since there's no taxable income to assess it on.

Maybe you have an S-Corp or C-Corp? If so, and you are an employee of that corporation (which you can be) then the corporation *will* pay the SE taxes on the wages they paid you, any way you look at it.