Here's the scenario: Single owner S-Corp w/ profit of $161,000 before section 179. Personal tax return shows 62,865 additional wages and ~11,000 rental building income. Deductions are: 18,500 mortgage interest and 9360 in taxes. Business purchased equipment for $100,000 at end of year. If $50,000 of section 179 is taken it triggers an AMT post 1986 adjustment of nearly that amount. When this is entered on the owners personal tax return it seemingly makes it pointless to take section 179. We hear about how businesses can take up to $105,000 in section 179 and how it's an incentive to get businesses to invest in future growth but any business that is successful enough to purchase equipment that costs that much is going to get hammered by the AMT anyway. Seems like a catch 22 to me. And then on top of that it is subject to the fourth quarter convention so if section 179 isn't taken depreciation is around $5000 for the first year on a $100,000 asset.
So I'm just wondering, does this sound right and are there any solutions to maximize the tax benefit of the depreciation? I could push it into next year as it is debatable as to when it was actually put into service. At least that would offer some flexibility for the next year and it wouldn't have to great of an impact on the current years taxes. In reality I'm hoping that I made a mistake but I penciled out some of the forms and it seems to me to be correct. Thanks for any input.
Matt
So I'm just wondering, does this sound right and are there any solutions to maximize the tax benefit of the depreciation? I could push it into next year as it is debatable as to when it was actually put into service. At least that would offer some flexibility for the next year and it wouldn't have to great of an impact on the current years taxes. In reality I'm hoping that I made a mistake but I penciled out some of the forms and it seems to me to be correct. Thanks for any input.
Matt
Comment