Thread: Tax questions (Sec. 179 and vehicle usage)

Started doing my taxes last night and I have a couple of questions about deductions for equipment purchases, depreciation, etc.

Ok so first - last year I spent approximately $10,000 on equipment and software for the business.

Let's say that hypothetically I spent $2,500 on a computer. I understand that I can either take the full deduction of that $2,500 now, or I can spread it out by depreciating it over the next few years.

My question is this - when I enter this asset into Turbotax and state that I want to schedule the depreciation, it then asks me if I want to take a special, one-time deduction. I've looked this up but I still don't quite understand what it is and whether or not I should do it. How does the special one time deduction of 100% of the cost of the item differ from if I had simply opted to take the full deduction this year rather than use scheduled depreciation? It sounds like the exact same thing, so what's special about it?

My second question - I have one vehicle that I use for both personal and business needs. About 20% is for business. One of the things I can deduct is the property tax portion of my tag renewal fees. The thing is, that same thing can also be deducted on my personal income tax forms. I assume I can't deduct the same thing in two different places, so is there any advantage of choosing one vs. the other?


If it makes any difference the business was a net loss for 2011, significantly so. The costs of starting up including equipment, legal fees, etc, far outweighed income. That's why I figured I'd be better off scheduling the depreciation as I expect 2012 will be better. My costs should be drastically reduced. Oh yeah it's also worth mentioning that this is for an LLC with a sole proprietor (me).

There are answers to your questions but they would require more questions. You might consider taking the cost of purchasing TurboTax as a learning experience and think about going to a tax accountant at this time. I know I wouldn't want the thought of an audit hanging over my head knowing that my accountant takes care of all of that for me when the time comes.

TurboTax processes your tax returns but does nothing for you in regards to tax planning. Time to step up. It's not that expensive for peace of mind.

I second that. With the cost of TurboTax Business (assuming you didn't pay yet) + Audit Defense, you might as well just go with a tax accountant. I went through the same thing recently. I've used TurboTax for years for my personal returns, but it's the first year I'm doing a business return and with that comes a higher audit risk. It wouldn't be the highest and best use of my time to learn tax codes and specifics right now, and probably not yours either, so I'd leave it to the tax professionals.