0

In the USA/IRS milieu...

Pretend it is 2018. Say Sally is a self-employed person. She creates dinosaur renderings for a number of large clients grossing say $300,000 a year.

Sally buys say five computers which are 100% for use in the business, no personal use. Each one is say $3000 (I think there's a limit of 2500 involved?). Total in the example $15,000. Say she buys them July 4 all at once to be specific.

Let's say (if it makes a difference) she does not bother having an LLC or an S-Corp, she simply trades as an individual.

In fact, in 2018, can she use the "Section 179" approach to simply deduct the entire amount - $15,000 - all at once in that year?


Also, "what form", as it were, does that go under - what's the line item that would be included on: i.e., Sally is mystified which category "Section 179" items appear in.


As the question title mentions, regarding buying PCs. Are there any gotchyas for different machinery / things? A sculptor has to buy a $3k sheet metal tool, a designer has to buy a $4k pottery kiln, etc - all just the same?

  • 1
    Do these questions have anything to do with a problem you are facing? Why are they always written in the third person? – JoeTaxpayer Apr 25 '18 at 12:31
  • Hi @JoeTaxpayer - strange question. Why does it matter if questions are written using "Example Person is..." ? Is there a site rule or something? – Fattie Apr 25 '18 at 13:08
  • 1
    From the Tour - "Focus on questions about an actual problem you have faced. Include details about what you have tried and exactly what you are trying to do." - It's certainly fine to have a friend you are helping, but the key is "an actual problem." Your questions seem to be all over the place, and it's tough to tell what you are actually trying to solve. And no, I'm not the downvoter, the question itslf is pretty legit. – JoeTaxpayer Apr 25 '18 at 13:21
  • So no, there's no site rule. And it's extremely commonplace that questions are phrased as "Bob and Jane .." It does seem to be explicitly and precisely on topic on this SE site: precisely item 13 from this list money.stackexchange.com/help/on-topic . I can't support the idea that you can only literally ask "problems you have faced" as opposed to just problems you are interested in; in the quote I feel you're misinterpreting that stylistic guidance ("be direct") for an explicit instruction that you can only ask about problems you "have literally had". – Fattie Apr 25 '18 at 13:29
  • Regarding the comment that my questions are "all over the place", i'll simply disagree, but thanks. I'm happy to offer constructive criticism of the overall arc of your contributions if you want it. But it seems incredibly non-typcial, even borderline offensive, to do so. Cheers – Fattie Apr 25 '18 at 13:32
4

2018 introduced 100% expensing with relatively high limits, Sally can deduct the entire amount that you propose from the income in 2018.

The limit is over $1M, so Sally should have no issue this year. Section179.org offers specifics and an online calculator.

An individual who does not form an LLC or Corp is deemed to be a sole proprietor and files via Schedule C. This should still permit the Section 179 expensing. (Unless the 2018 re-write of the tax code changed this. And another member will correct me.)

  • The whole "business!" spectre raised by Goat below, would seem to be a key issue. – Fattie Apr 25 '18 at 13:33
  • 1
    To be clear, 179 has allowed 100% expensing for a long time (that website goes back to 2007 and I have a record of p946 for 2005) but the limit was lower (especially before the 2008 recession) and TCJA'17 effective 2018 made it permanent (to the extent tax law is ever permanent) whereas previously it was 'extended' a year or sometimes two at a time, sometimes retroactively after the year had started, making planning and budgeting harder. And to confirm by anecdatum, I had no trouble taking it as a non-incorporated sole prop. – dave_thompson_085 Apr 25 '18 at 23:33
3

From my interpretation of the law, Section 179 primarily covers depreciable goods that are new to a business (can be purchased used), and covers (or replaces) depreciation reductions, though the deduction is not limited to such items. source: section179.org

In particular, the language seems to focus on businesses, and not individuals.

Who Qualifies for Section 179?

All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2018 should qualify for the Section 179 Deduction (assuming they spend less than $3,500,000).

Most tangible goods used by American businesses, including “off-the-shelf” software and business-use vehicles (restrictions apply) qualify for the Section 179 Deduction.

IANAL, or a tax professional, but my guess would be that "Sally" would likely be required to form an LLC or similar business structure to take advantage of this tax law. As @JoeTaxpayer and @Hart CO pointed out, sole-proprietorship counts for this purpose.

The Form involved is Form 4562 - Depreciation.

  • Didn’t new tax code include first year 100% expensing. – JoeTaxpayer Apr 25 '18 at 12:27
  • I remember hearing something about that, but didn't come across it while researching for this question. – GOATNine Apr 25 '18 at 12:35
  • Fascinating - the "needs to be an LLC" aspect seems to be the most critical issue then? – Fattie Apr 25 '18 at 13:09
  • From my interpretation, yes. But I'm not certain I'm correct in that either, as it may still apply to individuals, despite the language involved. – GOATNine Apr 25 '18 at 13:10
  • 2
    You don't have to have an LLC to be a business, a sole-proprietorship is a business. – Hart CO Apr 25 '18 at 13:45

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.