Depreciation 101: Is the Section 179 Deduction Right for your Business?

Although the Section 179 Deduction might seem redundant since the advent of Special Depreciation, the Section 179 Deduction can serve as an important tax planning tool despite its limitations.
This video tells you what the Section 179 Deduction is, how it works, and how it can effect your present and future taxable income.
2023 UPDATE: The maximum Section 179 Deduction for 2023 is $1,160,000. The Deduction starts to phase out as described in the video at $2,890,000 of asset purchases, and completely phases out at $4,050,000.
Introduction: 0:00
What is the Section 179 Deduction? 0:45
How does the Deduction Work? 2:05
The Section 179 Deduction as a Tax Planning Tool: 3:38
Reporting the Deduction on From 4562: 5:18
Review and Conclusion: 6:25
To learn more about MACRS Depreciation, click here: • Depreciation 101: Wha...
To learn more about Special Depreciation, click here: • Depreciation 101: Spec...
Additional Information and Resources:
IRS Publication 946: "How to Depreciate Property": www.irs.gov/pub/irs-pdf/p946.pdf
IRS Form 4562: "Depreciation and Amortization": www.irs.gov/pub/irs-pdf/f4562...
Congressional Research Service: The Section 179 and Section 168 (k) expensing Allowances: Current Law and Economic Effects: sgp.fas.org/crs/misc/RL31852.pdf
The Tax Geek on The Site Formerly Known as Twitter: @taxgeekusa
The Tax Geek on Reddit: www.reddit.com/r/askataxgeek
Image Sources:
The image of "Frank" was generated by thispersondoesnotexist.com and any resemblance between this image and any person, living or deal, is coincidental and not intentional.
Storyblocks.com
Pexels.com
Wikimedia Commons (CC-SA 2.0 - 4.0)
Kenneth C. Zirkel
NOTE: Any 2022 tax forms represented in this video have yet to be released by the IRS, and may differ from the forms that will ultimately be released. The 2022 tax forms as depicted are expected to be very similar to their 2021 counterparts.
Intro Music: "Bluesy Vibes" - Doug Maxwell - KZbin Audio Library
Outro Music: "Modern Attempt" - Track Tribe via KZbin Audio Library
DISCLAIMER: This video is for educational and informational purposes only. It is not intended to render tax advice or investment advice for individual situations. If you have questions regarding your particular situation, please consult with a qualified tax or investment professional.
The information in this video is current as of date of publication, and is subject to changes.

[@TheTaxGeek]

2023 UPDATE: The maximum Section 179 Deduction for 2023 is $1,160,000. The Deduction starts to phase out as described in the video at $2,890,000 of asset purchases, and completely phases out at $4,050,000.

[@ellenoir5678]

Top of the morning coach

[@cavaleer]

Great channel. I love how you slide in the disclaimer "oversimplified". haha

[@TheTaxGeek]

Thanks! Glad you like the channel!

[@user-ex2di1ix5i]

Great video!

[@TheTaxGeek]

Thanks!

[@gladyshurtadowood2924]

Thank you

[@TheTaxGeek]

You're welcome

[@dekej]

If your business has not generated income yet; however, you are a high earner, can use 179 to minimize taxes on w-2

[@TheTaxGeek]

No. You cannot use a Section 179 Deduction to either create or increase a business loss that can be used to offset other income.

[@deanbraden7695]

Good video 👍

[@TheTaxGeek]

Thanks 👍

[@LA2JERSEY]

Exactly how to opt in section 179 on the tax form? Thanks!

[@TheTaxGeek]

The property is listed in part I of form 4562.

[@binhvong5297]

Can Section 179 be used for rental properties, i.e. purchase of HVAC? (My 2022 Turbotax says it is only for commercial properties.)

[@TheTaxGeek]

You can't use Section 179 for rental property assets, but you can take Special Depreciation, which gives you largely the same result.

[@myhouse-yourhouse]

@@TheTaxGeek In the past, Section 179 could not be used to deduct personal property used in residential rental property. However, the Tax Cuts and Jobs Act eliminated this restriction starting in 2018. This means that landlords can now use Section 179 to deduct the cost of personal property items they purchase for use inside rental units-for example, kitchen appliances, carpets, drapes, or blinds.

[@mikethegamer7249]

hello , can you please explain how to file line 11 where is the limitation

[@TheTaxGeek]

Line 11 is the business income limitation. This is the tentative income from your business without regard to any Section 179 Deduction. This is explained at approximately 2:50 in the video

[@invictus_1511]

Can you highlight code 168 n compare

[@TheTaxGeek]

In my "Depreciation 101" playlist of videos, I go over the pros and cons of MACRS v. special depreciation v. the Section 179 deduction. (For those who might be confused, IRC Section 168 governs calculating depreciation for tax purposes).

[@matbriest9892]

For a vehicle under 6000 lbs purchased for 2023 sec 179 limit is $12,200. if a vehicle purchased for $40,000 . and used 100% for business purposes, written records kept. line 26(i) would be $12,200 can i then take the 80% of the remaining basis for depreciation for special depreciation line 25 , in the amount of ($40k - $12.2k) * 80%= $22.24k or is the $12,200 the limit for the vechicle for special and sec 179 and (h). Please clarify or perhaps point me to a demonstration of a vehicle under the 6000lb limit all of the tutorials I find are for those above the weight limit. line25: $22,240 line 26(h) $0 line 26(i) $12,200 or line25: $0 line 26(h) $0 line26(i) $12,200. Or what are my options thank you for your knowledge

[@TheTaxGeek]

The depreciation limits for a passenger vehicle is a combined limit for all types of depreciation, whether Special Depreciation, Section 179, or ordinary MACRS. If you take Section 179 up to the limit, you do not get an additional amount of bonus depreciation. Starting in year two, ordinary MACRS depreciation (subject to the annual limits) with a basis of the original cost of the vehicle, less any special depreciation or Section 179 deduction taken in the first year. I have a video explaining this process. kzbin.info/www/bejne/fqWnYn-gYs2hq80

[@zesqcpa3]

😘😘😘