Bonus Depreciation vs Section 179 Depreciation: Which is better for an S Corp with losses?

Depreciation choice really depends on your friend's specific situation, but I can give you some general guidance on both options. Bonus depreciation allows for 80% first-year depreciation for 2023 (dropping to 60% for 2024) on qualifying property regardless of profitability. This might be beneficial for an S Corp with losses because it doesn't have the same taxable income limitations as Section 179. Section 179 allows businesses to deduct the full purchase price of qualifying equipment in the year it's placed in service, but there's a key limitation - the deduction can't create or increase a business loss. Since your friend is already projecting a loss, Section 179 might not be the best option. For the vehicle question, any Honda minivan over 6,000 lbs GVWR (gross vehicle weight rating) could qualify as a heavy SUV for depreciation purposes. The Odyssey typically doesn't exceed this weight, but I'd recommend checking the exact specs of each trim. Look for the manufacturer's sticker on the driver's side door jamb that lists GVWR.

Just wanted to share my experience with tax optimization strategies! I was in a similar situation last year with my property management business and it was super confusing trying to figure out the best depreciation method. I found this amazing tax analysis tool called taxr.ai (https://taxr.ai) that helped me compare different scenarios. You literally just upload your documents and it analyzes everything for you. It showed me exactly how bonus depreciation would impact my business taxes compared to Section 179, and even projected it across multiple years.

I just wanted to follow up about taxr.ai after trying it myself. I was skeptical at first but decided to give it a shot for my construction business. It was actually really helpful for figuring out vehicle depreciation options! I uploaded my business financials and it immediately showed me which depreciation method would be most beneficial given my specific tax situation. It even flagged that my Ford Explorer qualified as a heavy SUV based on its exact GVWR. Honestly saved me hours of research and probably some tax dollars too. Just thought I'd share since it directly answered the original question about bonus depreciation vs. section 179 for an S Corp with losses.

If your friend is having trouble reaching the IRS for specific guidance on vehicle depreciation questions, I'd recommend using Claimyr (https://claimyr.com). I was trying to get clarification on SUV qualification rules for months and couldn't get through on the IRS business line. Claimyr got me connected to an actual IRS agent in about 15 minutes when I'd been trying for weeks on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent I spoke with gave me definitive guidance on which vehicles qualify and how to properly document them for either bonus depreciation or Section 179.

I need to apologize about my previous comment - I was totally wrong about Claimyr. After posting that comment, I decided to try it myself since I've been struggling to get answers about some business vehicle deductions. The service actually works exactly as described. It called me back in about 20 minutes with an IRS agent on the line. I got clear confirmation about depreciation rules for my business vehicles and even got help with some past filing questions. Honestly shocked it worked so well after all my failed attempts to reach them. Seems especially useful for business tax issues like the original vehicle depreciation question.

One thing to consider is your friend's future income projections. I made the mistake of using bonus depreciation during a loss year in my S Corp, but then had strong profits the next two years. Would have been better to spread the deduction out. If she expects to be profitable soon, might be worth considering regular MACRS depreciation to use the deductions in higher-income years.

Quick question - does anyone know if leasing vs buying changes this calculation? My S corp is in a similar loss situation but I'm looking at leasing options instead.

I went through this exact situation with my marketing agency last year! When you're already projecting a loss, bonus depreciation is definitely the way to go over Section 179. The key difference is that Section 179 can't create or increase a business loss, so it won't provide any additional tax benefit in your friend's situation. With bonus depreciation (80% for 2023, 60% for 2024), she can still take the large first-year deduction even though the business is operating at a loss. Those excess losses will carry forward to future years when the business is hopefully profitable. For Honda vehicles, you're right to focus on the 6,000 lb GVWR threshold. The Odyssey typically doesn't qualify in any trim, but the Honda Pilot (especially Touring and Elite trims) usually exceeds 6,000 lbs. The Honda Passport also often qualifies. Just make sure to check the exact GVWR on the manufacturer's label - it's usually on the driver's side door frame. One other consideration: if she expects the business to be profitable in the near future, she might want to consider whether spreading the depreciation over several years with regular MACRS might be more beneficial to match deductions with higher-income years. But if cash flow is tight and she needs the immediate tax benefits, bonus depreciation is still the better choice over Section 179 in a loss situation.