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My income is $155,000 and receive W2. Single, no children.

Hello there, My income is $155,000...
Hello there,
My income is $155,000 and receive W2. Single, no children. No mortage. No disability. No other income.
I opened a DBA as Sole proprietorship and the biggest expense this year will be $50,000 in equipment. It's a CAD/CAM System (Scanner, computer and milling machine)
Can I use Section 179 deduction to lower my "taxable" base from $155,000 to $105,000..?
I will start using the system this year, might not be at full speed but some work.
If so my tax burden would drop from about $42K (I live in Alabama) to about $22k roughly.. does it sound right?Also does it matter if:
- The machine is in a foreign country but I buy under my name and my DBA (on receipts)
- Do I buy it all in cash or I finance it
Or - I take a personal loan to buy itThank you very much
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Answered in 9 minutes by:
10/15/2017
Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 12,867
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

HI, MY NAME’S LANE - I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice 1986.

...

You CAN use §179 here. THe hardware is always eligible, and the software is eligible becasue it's an available to the public product and not custom developed software.

...

There IS a business income limitation, however. WHich means that you can wipe out any business taxable profit on the schedule C but will have to carry forward with the same limitations going forward.

...

BUT, at least it's not lost as some deductions can be.

...

And yes, you can buy with cash OF finance.

...

See this:

...

http://www.section179.org/section_179_and_software.html

...

Please let me know if you have any questions at all.

Lane

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Customer reply replied 1 month ago
Thanks for your quick reply. I'm not sure I understand the business income limitation BUT for this year I would have very limited income.. so for now the most important thing for me to know is if my numbers are in the ball park..
Meaning:
$155,000 taxes paid $42k
After buying $50k equipment
$105,000 base dropping taxes to $23k
REFUND of around $20k..??Thank you very much

How much of that income is coming from the business (sole-proprietorship)?

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Customer reply replied 1 month ago
I'm not adding any income from the business let's call it a thousand dollars the bulk, $155,000 is my W2

So sorry, but that's the issue. Te deduction is limited to the business income FROM that activity.

...

See this:https://www.irs.gov/publications/p946#en_US_2016_publink1000299339

...

You'd be better off to deduct regular way (over 5 years for the equipment and 3 years for the software) so that you can generate a loss to use against the W-2 income

Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 12,867
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Finance Specialists are ready to help you
Ask your own question now
Customer reply replied 1 month ago
Ok thanks for the clarification!
Have a great night

You too... sorry to be the messenger.

...

Enjoy your eventing! Thanks for the rating.

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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 12,867
12,867 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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