Q:

Subject: 179 Inuiry

 

I like your weblog.  I heard the 179 deduction for 6,000 lb vehilce is going to be eliminated in 2008? True?  Also, in general, what is the best entity as a real estate broker?  S Corp? Thanks for feedback.

A:

You are the victim of either a hoax or, more likely, bad and outdated info on the Section 179 deduction, which is very prevalent on the web.  As you can see on my Section 179 web page, the only change for 2008 is a higher maximum. 

I have a suggestion for anyone who hears or sees notices of changes such as you are questioning.  Demand that the person making the claim provide documentation of that fact beyond just that he heard it from someone.  Until a rumor has been properly documented, it should not be trusted or in any way relied on.  I am frankly getting a little tired of debunking these kinds of unsubstantiated rumors, where people try to put me on the spot to prove that something hasn’t been changed, when the burden of proof in this kind of situation should rest on those who claim that an actual change has been enacted.

In regard to the best entity to use, that is a decision that must be made with the assistance of a qualified professional tax advisor, who can properly analyze all of the unique details involved.  There is no such thing as a one size fits all approach to this kind of thing and anyone who claims that there is should be avoided.

Good luck.

Kerry Kerstetter

 

Follow-Up:

Thank you for the time to reply at length.  Best,

Q:

Subject: Section 179

Hello Kerry,
I have been searching for the 2008 section 179 dollar limits and your website is the only place I have found an amount.  Would you be willing to share with me where you found this information?

Thank you,

A:

I have also been amazed at how few other professional tax reference services have updated their Section 179 info.  Some, such as the CFS Quick Reference, still have outdated 2007 numbers ($112,000 instead of $125,000).

I posted the new 2008 limit on my blog back in September based on the CCH inflation adjustment calculations.

In October, IRS confirmed all of the CCH figures in Rev Proc 2007-66  which they announced in this press release.

Here is the exact quote from page 14 of that Rev Proc:

.20 Election to Expense Certain Depreciable Assets. For taxable years beginning in 2008, under § 179(b)(1) the aggregate cost of any § 179 property a taxpayer may elect to treat as an expense can not exceed $128,000. Under § 179(b)(2) the $128,000 limitation is reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the 2008 taxable year exceeds $510,000.

I hope this helps.

Kerry Kerstetter

 Follow-up:

Thank you very much.  I actually did look at REV PROC 2007-66 but not in much detail since it seemed to look more for individuals and not for businesses. 

Q-1:

Hi,

Very impressive website. I have a question and would be grateful if you can help.

I am an independent contractor on the side and also have a full time job. My independent contractor job pays me without tax deductions and I am expected to pay my own taxes. I have made about 15,000 this year. I am thinking of buying an SUV that meets the IRS rating of over 6000lbs for my independent contractor job, but I am worried that I might not have made enough to deduct the 25,000 IRS deduction. Can I add  my AGI from my full time job to qualify for this deduction or is there another way of doing this. 

 

thanks.

A-1:

I have covered this point on several occasions.

It is possible to use other kinds of earned income, including from W-2s, to allow a higher Section 179 deduction than just the net income showing up on your Schedule C. 

However, this is not something you should try figuring on your own.  You need to be working with a professional tax advisor, who will be able to help you properly avail yourself of the hundreds of tax issues that you would most likely screw up on your own.  Any good professional tax advisor will save you much more in taxes than his/her fee; so you would be nuts to tackle your 1040 by yourself. 

Likewise, a good tax advisor may see that it would be advantageous for you to operate your business in a corporation instead of as a Schedule C sole proprietor, another topic I have discussed on countless occasions.

Good luck.

Kerry Kerstetter

Q-2:

Hi,

Thank you very much for your reply. I checked your website for tax pros in North Carolina but none was listed. Do you know of any in North Carolina. Thanks again.

A-2:

Those are the only names I have.

As I have said in my tips for selecting a tax advisor, as well as in countless blog posts, choosing tax pro merely based on geographical proximity is misguided.  A good tax pro could be anywhere in the country and give you even better service than someone who happens to be right next door to you. 

Good luck.

Kerry