Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Pushing Sec. 179 deductions into next year…

Posted by taxguru on November 16, 2007

Q:

Subject: Section 179

 

Questions:

 

If a company begins in November 2007 can the section 179 be taken in the 2008 calendar year???

 

Thanks

A:

Your question is a bit vague, so I’ll see if I can hit on what you’re after.

If you’re asking if a calendar year business buys new equipment during 2007, can it claim the Section 179 expensing deduction for that equipment on its 2008 tax return, the answer is NO.  Equipment acquired and placed into service during 2007 must be claimed on the 2007 tax return.  Equipment acquired and placed into service during 2008 will be claimed on the 2008 tax return.

I’m assuming your question has to do with the fact that there won’t be enough net income on the 2007 tax return to justify any Section 179 deduction, so it would be better suited to 2008 when you will be receiving more income.  As your professional tax advisor should be explaining to you, you can probably get the same effect as you desire by actually entering the full Section 179 on your 2007 tax return.  The tax program will then apply the income limitation test, which will make all or most of the Section 179 carry over to the 2008 tax return, where it will be available to be offset against the 2008 net income.

Another possible scenario would be that you have a new C corp with its first fiscal year ending some time in 2008, such as September 30.  In that case, any new business equipment purchased and placed into service by 9/30/08 will be eligible for Section 179 on that tax return, which will technically be a 2007 1120.

I hope I addressed your point.  Your professional tax advisor should be able to give you more relevant advice, better suited to your actual circumstances.

Good luck.

Kerry Kerstetter

 

Follow-Up:

Kerry:

 

Yes, you have answered my question.

 

Thank you very much

 

 

 

 

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