Tax Deduction Income Limits
August 28th, 2008
If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
Question: Section 179 deduction -determining business income limitation?
So this is the first year we are doing a Scedule C. We have an operating loss, plus about 6,500 worth of equipment we want to depriciate and we are considering the section 179 deduction.
On line 11 of Form 4562, it tells you to enter the smaller of business income or line 5 (the 108,000 annual limit). When you go into the instructions for line 11, they tell you to start with business income and add wages earned as an employee from line 7 of the 1040.
So I have come to the conclusion that our w2 income from our employers can be used to determine the limit on line 11 of 4562. But I wanted to see if any other tax people out there agree. Can you claim the Sec 179 expense deduction even if you have no business income as long as you have enough W-2 earned income?
Thanks
I said 108,000 above, but just noticed I was looking at the 06 tax form. I realize that the 07 limit is 125,000.
Answer: Well the total on your 4562 gets carried to your Schedule C line 13 so you will end up with a business loss which carries to your 1040 line 12. Yes that 179 limit includes all income – not just your business income. Why would you want to take the entire deduction instead of depreciating and having deductions for years. What will you use next year then? If your new business does not generate a reasonable profit for 3 out of 5 years then the IRS can reclassify it as a hobby and disallow any losses. Keep that in mind as you decide how to proceed. In case you weren’t aware – you can just select a portion to 179 and depreciate the balance.
Items on Amazon Right Now for Tax Deduction Income Limits:
The good and the bad of the housing bust
From Y2K to H1N1 – Less construction meant less revenue for municipalities and school districts. Lower prices gave open space preservationists a boost.
Personal Financial Planning Tips : How to Avoid an IRS Income Tax Audit
Posted in 
Tags: