Q:

Subject: Section 179 - Please help

Hello TaxGuru.  I came across your website after searching google and I think my situation is similar to what you describe in the following link regarding sole proprietorships and taking the Section 179 deduction…

http://www.taxguru.net/2004/07/limits-on-section-179.html

I just wanted to briefly describe my situation and ask you if I am interpreting things correctly.

My wife started a photography business at the beginning of 2006.  For the year, the business will have a net loss of about $16k due to photography equipment purchases.  I wanted to deduct all of these business assets using Section 179.  We are filing married-jointly and we both have W2 income which resulted in positive taxable income both before and after applying the section 179 deductions.  Is this OK to do, or do I need to depreciate the assets?

Thank you for your help!

A:

You seem to be understanding the issue correctly.  Your W-2 income can be used to determine how much Section 179 can be claimed on your wife's Schedule C.  The net loss, including the Sec. 179, on her C will shelter some of your W-2 income, most likely resulting in a larger refund of taxes withheld from your paychecks.

As I mentioned in that post, as well as in practically every other one, you should work with a professional tax advisor and not try to prepare your own tax returns.  There are so many ways you could screw things up on your own that it would be extremely reckless on your part to do your own 1040.  Practically any tax preparer should be able to save you much more in taxes than his/her fees; so you should end up with more money, in addition to the peace of mind that IRS and your State won't be coming after you.

Good luck.

Kerry Kerstetter

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/02/2007 10:52:00 AM Send this post: