McKenzie purchased qualifying equipment for his business that cost $212,000 in 2019. The taxable income of the business for the year is $5,600 before consideration of any $179 deduction. a. Calculate McKenzie's $179 expense deduction for 2019 and any carryover to 2020. b. How would your answer change if McKenzie decided to use additional first-year (bonus) depreciation on the equipment instead of using $179 expensing?

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Business

Jane Bernard

29 December, 21:41

McKenzie purchased qualifying equipment for his business that cost $212,000 in 2019. The taxable income of the business for the year is $5,600 before consideration of any $179 deduction. a. Calculate McKenzie's $179 expense deduction for 2019 and any carryover to 2020. b. How would your answer change if McKenzie decided to use additional first-year (bonus) depreciation on the equipment instead of using $179 expensing?

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Seth Rangel · Answer 1

It will deduct up to 5,600 with any method as it cannot deduct above her current taxable income.

The rest of the cost will be aplpied into subsequent tax periods.

Explanation:

The S179 deduction can only be done up to a taxaable income of zero

Therefore, as McKenzie taxable income is $5,600 it will deduct as much as that. Leaving the rest of the depreciation for further years.

212,000 - 5.600 = 206.400