Question

Rudy is considering whether to make the elec-tion under Sec. 179 to expense the maximum amount of the acquisition cost related to cer-tain fixed asset additions. What advantages are associated with the Sec. 179 election? In your post, consider why a taxpayer may not want to make the Section 179 deduction, and also consider other depreciation options available.

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Answer 1

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As per Tax year 2019: Solution: Advantages of Sec. 179 election: 1) Additional depreciation deduction: A taxpayer can deduct additional depreciation upto $1020000 but limited to the taxable income during the current period. 2) Tax Saving: By electing 179 deduction, taxable income can be reduced and related tax can be saved during the current period. why a taxpayer may not want to make the Section 179 deduction considering other depreciation option: 1) In case of Net operating loss in current period: In taxpayer have net loss during a period, that can't elect 179 deduction. 2) Other depreciation option: If bonus depreciation elected: If bonus depreciation has been elected then taxpayer might not want to make section 179 deduction. Because, bonus depreciation is upto 100% of cost recovery. 3) If Taxpayer don't see any significant tax saving: If taxpayer don't see any significant tax saving on election of sec. 179 deduction then it may not elect 179 deduction.