Thanks everybody for your responses, there has been a lot of
good advice here. It seems like there is still some debate
about whether the 179 deduction is allowable against regular
employee W2 income. I guess the safest way would be to use
regular depreciation, and that might make more sense in the
long run.

FYI...the business is making classical guitars. I bought
most of the equipment in 2004 and started building, however
the process of building handmade classicals takes a long
time, so by the time I completed guitars which were good
enough to sell, it was already 2005. I will have business
income to report in 2005 and will most likely use regular
depreciation.

Thanks again for all the responses. Cheers!

John

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

<elshaw2003[at]yahoo.com> wrote:

- quote -

If your business was operating in 2004, even if no income
came in, and you have enough earned income fromother sources
including employment, you can claim the Sec 179 expense by
filing orm 4952 and Schedule C. But you might be wasting
money in the long run if you expect the business to be
profitable.

That's because every dollar deducted now reduces income and
income tax. But if you will have self employment income in
your good years, every dollar of depreciation reduces both
income and income tax as well as self employment income and
self employment tax.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

Is the equipment used for work for your employer? If yes
then you could indeed allocate a percentage of the
equipment's basis and use the sec 179 expense as an itemized
deduction, subject to the 2% AGI limitation. The percentage
attributable to the home business would not generate a 179
deduction as there is no income against which to expense it,
so you'd be allowed a carryover or you could use regualr
depreciation and take that as an expense this year.

If none of the equipment is used in you "day job" then no,
you cannot take 179 expense for it against th w-2 income,
and as above, either c/o the 179 expense into 2005 or use
depr. and expense it currently and in future years based on
asset type...

Dave

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

<elshaw2003[at]yahoo.com> wrote:

- quote -

Assuming the "business" is a legitimate venture motivated by
wanting to make a profit, and presuming you actually started
offering your services/products etc (if you didn't really
start acting like a business in 2004 the assets are not yet
considered placed in service) then the equipment is SUBJECT
to the S179. However, S179 can't reduce your BUSINESS income
below zero. Any unused amout is carried forward to future
years to be offset against profits then. You might realize a
loss more quickly by using the 50% bonus depreciation which
accelerates the deduction and can reduce the net to be a
loss.

Mike Lewis, CPA

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"elshaw2003[at]yahoo.com" <elshaw2003[at]yahoo.com> wrote:

- quote -

Two answers. A) yes Sec. 179 can be used to offset wage
income also earned by a self employed person. B) It doesn't
sound like your business was in operation in which case Sec.
179 isn't available on the assets you purchased.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

No, you cannot use the sec. 179 deduction against your W-2
income; you can only use it against the income that you
generated from your trade or business.

Sec. 179(b)(3)(A) limits your sec. 179 deduction to the
amount of income (calculated without reference to sec. 179)
you have from all of your trades and businesses. Being an
employee, however, is not a trade or business, and thus the
income you earn as an employee is not income from a trade or
business.

Sorry.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"elshaw2003[at]yahoo.com" <elshaw2003[at]yahoo.com> wrote:

- quote -

Yes.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

<elshaw2003[at]yahoo.com> wrote
- quote -

Yes, you can add the W-2 income to any business profits to
establish the ceiling on the Section 179 deduction. In your
case, take the W-2 profit and subtract your losses. That
number is the ceiling of which your Section 179 deduction
can not be more than.

Whether or not taking Section 179 is advisable or not is
another story, as is whether or not your "business" activity
had begun. Section 179 is only available for assets "placed
in service", in which case, if you didn't have income, it
could be argued that you weren't in business, and Section
179 wouldn't apply.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Okay, I've heard a lot of people give different answers
regarding section 179. Here is my question:

I have a regular job with W2 income I earned in 2004. I
also started a home business in 2004 and have about $6,000
in initial equipment costs. The business didn't have any
income in 2004. Can I take the 179 deduction and fully
depreciate the equipment in 2004 against my W2 income? The
way I read the instructions, It says use the income from
line 11 which includes all w2 income as well. I'm trying to
get in touch with the IRS for a solid answer but have not
heard from them yet. Any help would be greatly appreciated.

Thank you!

John

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->