Section 179 Limitations & Carryforwards

Generally, the Section 179 deduction is limited to the income of the business before consideration of the deduction (i.e. you generally cannot take the Section 179 deduction if it will generate a loss.) However, if your Section 179 deduction is limited because of this, there is a carryforward of the disallowed deduction that does not expire.

What this means is that if a business has a Section 179 deduction that is limited as described above, the carryforward can be used in the next tax year rather than taking depreciation deductions over 5 or 7 years. So, if your goal is to keep taxable income to a minimum this may be the best approach to take.

There may be other considerations such as possibly being in a higher tax bracket in future years that will increase the value of deductions in those years that may affect taking the Section 179 deduction, so it is always best to review your situation with a tax professional before making a decision.

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