New Start-Up Business

[nypreparer]

I'm getting conflicting information here. I have a client that has W2 income but decided to start a business last year. He didn't have any income but did have some expenses, mainly equipment to depreciate. I am able to use the bonus depreciation to reduce his overall tax bill on the equipment, correct?

[Lion]

Was he "open for business"? You can depreciate his equipment, using any allowable method, as of his start of business.

[TaxGuyBill]

I am able to use the bonus depreciation to reduce his overall tax bill on the equipment, correct?

As was point out by Lion, IF he was "open for business", you could do that. However, you might not WANT to.

Using Bonus now would save income tax, which would improve his cash flow, so maybe that is what your client wants. However, if you used regular depreciation to spread out the deduction, the depreciation deduction in future years would hypothetically reduce income tax AND self employment tax.

There are a lot of variables in things, so you would need to analyze things and then discuss the pros and cons with your client.

[kathyc2]

I'm getting conflicting information here. I have a client that has W2 income but decided to start a business last year. He didn't have any income but did have some expenses, mainly equipment to depreciate. I am able to use the bonus depreciation to reduce his overall tax bill on the equipment, correct?

Was the equipment placed in service in 2021 or merely purchased?