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IRS Section 179 and Sole Proprietorships?

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My question is this, i am starting a new Sole Proprietorship and am buying a HD Cargo Van for 100% business use(Nissian NV3500) I would like to take the 100% deduction the first year(around 35k). I doubt I am going to have anywhere near that taxable income this first year, can I use part of it this year, and part next year and if there is anything remaining the third year? Do I take this off my personal tax form? or business tax form?

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rated:
Just remember that the section 179 deduction limit might be higher than you actually want to deduct in the current year, and if you have a carryforward, you don't have a choice, it gets used to the full extent of the limitations.

https://www.irs.gov/publications/p946/ch02.html#en_US_2016_publink1000299339

Business Income Limit

The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business.  

https://www.irs.gov/publications/p946/ch02.html#en_US_2016_publink1000299343

Carryover of disallowed deduction.   You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. This disallowed deduction amount is shown on line 13 of Form 4562. You use the amount you carry over to determine your section 179 deduction in the next year. Enter that amount on line 10 of your Form 4562 for the next year.

If you place more than one property in service in a year, you can select the properties for which all or a part of the costs will be carried forward. Your selections must be shown in your books and records. For this purpose, treat section 179 costs allocated from a partnership or an S corporation as one item of section 179 property. If you do not make a selection, the total carryover will be allocated equally among the properties you elected to expense for the year.

If costs from more than one year are carried forward to a subsequent year in which only part of the total carryover can be deducted, you must deduct the costs being carried forward from the earliest year first.  

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Taxmantoo, should I pay myself personally well and thus increase my business losses and apply the 179 deduction to my personal income or take much smaller amounts and build out the business faster with new merchandise? I could do most like anything from 75/25 business to personal or the opposite, in other words keep more money in the business or pay myself personally a higher wage. i can live on the former, barely. My goal is to have a zero tax liability personally or for the business as long as possible.

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Kingofthenet said:   Taxmantoo, should I pay myself personally well and thus increase my business losses and apply the 179 deduction to my personal income or take much smaller amounts and build out the business faster with new merchandise? I could do most like anything from 75/25 business to personal or the opposite, in other words keep more money in the business or pay myself personally a higher wage. i can live on the former, barely. My goal is to have a zero tax liability personally or for the business as long as possible.
  I recommend reading a lot more about entity choices.

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I am not worried about personal liability, I understand that a sole Proprietorship is somewhat like an extension of myself personally. I guess i wont really have any business tax transactions as it all will go on my personal 1040? I still get to deduct my cost for products right?

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Kingofthenet said:   I am not worried about personal liability, I understand that a sole Proprietorship is somewhat like an extension of myself personally. I guess i wont really have any business tax transactions as it all will go on my personal 1040? I still get to deduct my cost for products right?
  You really need the benefit of professional tax and accounting help, or much more study.
All your business related income and expense are reported on Schedule C of Form 1040, with the net profit or loss being reported on your 1040.  As a sole proprietor you do not pay yourself a salary - the net profit (or loss) is your "salary".  

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I have too, don't I? Who pays my SS and FICA? I need to earn IRS and Social Security credits.IF I take that HUGE 179 loss in the first year,I do get to carry it, till I use it all over time? I don't 'lose it' if I don't use it immediately right? I can use the 179 deduction for my expensive van over years? Don't you make more Govt 'credits' the more you make? I want a nice BIG Social Security  retirement.

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If you use Turbo Tax or something similar, it will calculate your SS/Medicare tax automatically as tax owed on any profit when you fill out schedule C. Remember, as a sole prop. you are paying the full 15%, not half of that like employees. Take the 179 up to your income limit, and carry over the rest. Or, if you made very little in the first year, carry more over for the future. It's up to you how you want to do it.

A few years ago we had a monster year, so I bought a new truck and took the entire deduction for that year.

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Get into the rental property (real estate) business - you never have to show a profit. Any other business (o/t farming) the IRS says you need to show a profit 3 out of 5 yrs or they will say your business is a hobby and you can not deduct any expenses on a hobby.

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Kingofthenet said:   I need to earn IRS and Social Security credits....Don't you make more Govt 'credits' the more you make? I want a nice BIG Social Security  retirement.
  
 You earn credits based only on your net earnings. Taking BIG deductions will make it harder to earn a BIG social security retirement.

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busnut said:   Get into the rental property (real estate) business - you never have to show a profit. Any other business (o/t farming) the IRS says you need to show a profit 3 out of 5 yrs or they will say your business is a hobby and you can not deduct any expenses on a hobby.
  Well that's not true.  A profit 3 out of 5 years just gives you a free pass from them reviewing your business to determine if it is a business or a hobby. 

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