Equipment depreciation guidelines.

Wingnut · Mar 14, 2002

thought of that, Paul ... and that's what I would have done in Canada. But, in this case, the business use is for work I'm doing fo rmy employer. It wasn't required (or even supported) by my employer ... I just wanted the ability to use the travelling hours for working on my projects instead of watching airline-butchered movies.
Although an audit would be no big deal ... nothing fo rthem to find ... I hate the waste of time ... one experience in Canada over business deductions was enough. I'll just write this one off as another missed opportunity and keep it in mind for the next time.
thanks
pete

Anonymous Poster · Mar 14, 2002

hi all
I was doing some research for my first tractor purchase and happened on this thread. This is such a great website I thought I'd try to help. I'm a non-practicing CPA (still got my license but too busy with programming & websites to stay on top of everything) but I can tell you that the Section 179 deduction has been around quite awhile. There are a number of limitations on it including the $24,000 limitation but more importantly from what I've seen on this thread, there is a Business Income Limit. That means that you cannot expense more than your taxable business income. That also means that it cannot be used to create a loss.

If you've already filed your taxes that way you need to get an amended return in ASAP. The IRS computers will eventually pick this up and you'll be tagged for interest and (possibly) penalties from the time the return is due or filed until the time you pay the difference. Believe me, it always comes as a rude surprise when you get that letter from them!

If part (or all) of your $24,000 limit is disallowed you can carry it over to the next year.

Good luck guys. Let me leave you with an opinion from experience as a CPA. You would be better off saying unflattering things about a mobsters wife than messing with the IRS. When they come and say they want x amount of money you either a) pay up, b) spend large quantities of money and time trying to bargain with them or defend your case, or c) lose your business and any assets they decide are worth attaching.

Check with a CPA or the IRS before you turn in anything that sounds "too good to be true"

cowboydoc · Mar 15, 2002

Carey,
That only applies if your business is a hobby and not a true business. If your "other" business is a true business and you can prove that it is a true business then you can invest other taxable money into this business. For example if I make x amout of dollars working for XYZ Corp. I can use that money to start-up another business, say ABC Corp. I can take a loss on ABC Corp and reduce my taxable income from XYZ Corp. due to the loss. So yes IF you have a legitimate business you can use income from another business to start a different business and claim all of the loss. If you are a "hobby" business then no you are right you can only claim up to the amount that your business actually earned that you bought the asset for.

MikePA · Mar 15, 2002

TurboTax has what appears to be very comprehensive explanation of Section 179 Deductions. It discusses Material Participation, Significant Participation, Active Losses, Passive Losses, etc. and TT keeps track of all of this. I would have attached IRS Pub 946 to this post but the pdf file is just a little too big at 456K /w3tcompact/icons/smile.gif, so here's the <A target="_blank" HREF=http://www.irs.gov/pub/irs-pdf/p946.pdf>link.</A>

cowboydoc · Mar 15, 2002

On page 17 of what Mike posted it says that the limit of your deduction is limited to the TOTAL net income and losses for ALL trades and businesses you actively conducted throughout the year. Income includes section 1231 gains or losses, interest from working capital on your business, and wages, salaries, or tips as an employee.

Wingnut · Mar 15, 2002

What I didn't see you saying, Carey, is that it would be an automatic flag to the IRS to audit me if I purchased a laptop to use for business. According to Turbotax (with my lack of deductions, a standard 1040 is overkill - so I did it on the web) my laptop was ok as long as I purchased it and used it in support of my job. It didn't specify that it would only apply if my employer required it.

Wingnut · Mar 15, 2002

What I didn't see you saying, Carey, is that it would be an automatic flag to the IRS to audit me if I purchased a laptop to use for business. According to Turbotax (with my lack of deductions, a standard 1040 is overkill - so I did it on the web) my laptop was ok as long as I purchased it and used it in support of my job. It didn't specify that it would only apply if my employer required it.
Wrong?

wingnut (but not nuts enough to ignore a legal and logical deduction)

Wingnut · Mar 15, 2002

Richard,
yes, but can I keep writing my $20,000 tractor off until I run out of deduction if I write off only what I manage to sell the mini's for (assuming SHE-who-must-be-obeyed ever agrees to seel one)?

PaulT · Mar 15, 2002

Wingnut,

There is another category of valid expenses, although they are much less attractive than the section 179. Unreimbursed business expenses - things like briefcases, expensive pens, laptop computers, if they are purchased ot help you do your job, and you couldn't convince your employer to pay for them, can be deducted TO THE EXTENT THAT THEY EXCEED 2% of your AGI (or was it taxable income).