Profit subject to SE tax reduced by 179ded?

[John of PA]

A profit on a 1065 (LLC) is 50,000 before the Sec 179 Depr deduction and 30,000 after the 179 Depr deduction. Which is subject to the SE tax (Soc Sec & Medicare), the 50,000 or the 30,000. My software is putting 50,000 on the K-1 as SE income but I believe it should be 30,000.

[Jesse]

What software are you using? Is there a worksheet or check the box to take the Section 179 deduction?

Are there other restrictions that are disallowing the entire Section 179 fo flow through?

[John of PA]

Individual Return level, not entity level

Jesse,
Thanks for the reply, I just realized the software (Lacerte) is working OK. I was looking for the SE income to be reduced by the 179 deduction on the K-1 at the 1065 entity level. But now I realize the software does in fact reduce SE income by the 179 ded amt, but only at the individual level (on the 1040, sch E p2), which makes sense becasue at the entity level, it is not yet known if the 179 ded is even going to be allowed.

[Bees Knees]

The instructions for Schedule SE, page two, say to reduce income from box 14 of Schedule K-1 by any section 179 expense deduction claimed, unreimbursed partnership expenses claimed, and depletion claimed on oil and gas properties. A separate schedule should be attached to explain these expenses.

The reason, as you mentioned, is because these are expenses against SE tax that can only be calculated at the individual partner level. Therefore, the partnership K-1, box 14 for self employment income will be self employment income prior to being reduced for these expenses.

[John of PA]

Ty

TY BN, that makes sense.