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Business equipment write-off limits
Dear Tax Talk:
Are wages included in the calculation of the Section 179 business
limitation on line 11 of the form 4562? For example, if I have $40,000
in wages, start a new business that has Schedule C sales of $75,
but bought $5,000 of equipment, is my Section 179 limit $75? Or,
since I also have wages, can I bring the $4,925 loss to the 1040?
Jim
Dear Jim:
Depreciation continues to be the theme this week. Section 179 expense
is a special depreciation allowance for small taxpayers (Microsoft
doesn't get this). Under Section 179, you can write off the cost
of up to $24,000 in depreciable property in the year that you purchase
the property for use in your business. Obviously, this is beneficial
and encourages annual investment by small businesses.
One of the conditions to claim the allowance
is that you have overall business income. In determining if you
have overall business income you include all businesses, including
income from employment. Therefore, for purposes of line 11 of Form
4562 include your $40,000 in wages and $75 from Schedule
C in your overall business income even though they're different
businesses.
-- Posted: March 28, 2003
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