Can I finance and lease equipment through my LLC to claim Section 179 deduction against W2 income?

This is definitely a legitimate strategy but you need to be careful about the details. Section 179 allows businesses to deduct the full purchase price of qualifying equipment in the year it's placed in service rather than depreciating it over time. A few important points to consider: First, the equipment must be used for business purposes more than 50% of the time to qualify. The company managing the equipment leases needs to document this properly. Second, there's a limit to Section 179 deductions - for 2024, it's $1,220,000, with a phase-out beginning at $3,270,000 in equipment purchases. The key aspect of your plan that makes it work is that S-corporation income/losses pass through to your personal return, allowing you to offset your spouse's W2 income. This is completely legal as long as you have basis in your S-corp. What concerns me slightly is the projected refund amount - make sure your tax advisor has factored in passive activity loss limitations and at-risk rules that might limit how much of the deduction you can actually use in a single year.

I started using taxr.ai after a similar strategy was suggested to me by my accountant. I was skeptical about the whole Section 179 approach with leasing equipment through my LLC to offset income. I had all these documents from the leasing company and wasn't sure if everything was legitimate or if I'd end up getting audited. I uploaded everything to https://taxr.ai and they analyzed all the documentation, identified potential red flags in the arrangement, and gave me a detailed breakdown of how this would work with my specific tax situation. They even pointed out that my equipment leasing arrangement needed more robust documentation to prove business purpose and active participation. Honestly saved me from making some mistakes that could have come back to haunt me if I got audited. They also helped me understand exactly how much of the deduction I could actually use against my personal income tax.

Just wanted to follow up on my earlier questions about taxr.ai. I decided to try it out after our discussion here and I'm actually really impressed. The analysis caught several issues with my planned equipment leasing strategy that my CPA hadn't mentioned. Turns out my operating agreement had language that could have created problems with the Section 179 deduction, and they identified that I needed to document my material participation more systematically. They even gave me templates for tracking my hours and involvement. The most valuable part was their explanation of how the at-risk rules would limit my deduction based on my specific financing arrangement. I was able to restructure things before proceeding, which should save me from headaches down the road. Definitely worth checking out if you're considering this kind of tax strategy.

I tried pursuing a similar strategy last year and quickly found that dealing with the IRS on this was a nightmare. I had questions about active participation requirements and how the financing structure might affect my at-risk amount, but couldn't get through to anyone knowledgeable at the IRS. After wasting hours on hold multiple times, I finally used https://claimyr.com to get someone on the phone. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c - they basically navigate the IRS phone tree for you and call you when they have an agent on the line. Got connected to a senior tax specialist who clarified several aspects of Section 179 that were crucial to my situation. Found out my leasing arrangement needed specific documentation I hadn't prepared. Without that call, I might have proceeded with an arrangement that could have been challenged.

Well, I need to eat some humble pie here. After expressing skepticism about Claimyr in my earlier comment, I decided to try it anyway since I was desperate for answers about my equipment leasing situation and Section 179 deductions. It actually worked! Got a call back in about an hour with an IRS tax specialist on the line. I was able to ask detailed questions about how to properly document business purpose for my equipment leasing arrangement and got critical clarification on the at-risk rules that apply to my financing structure. The agent walked me through exactly what documentation I needed to maintain to support my Section 179 deduction and how to handle potential recapture issues if I sell the equipment early. This one conversation probably saved me from making a $30k mistake on my taxes. Sometimes being proven wrong is the best outcome!

I actually did something similar last year with construction equipment. One thing to watch for that my CPA missed initially - if you're financing 90% of the cost but taking 100% of the purchase price as a Section 179 deduction, you need to be careful about the "at-risk" rules. You can only take deductions up to the amount you're personally at risk for. In my case, we had to restructure the loan to make sure I was personally liable for the financed portion in order to claim the full deduction. Otherwise, I would have been limited to deducting just my 10% down payment in the first year. Also, don't forget about state taxes - not all states conform to the federal Section 179 limits, so you might not get the same benefit at the state level.

Has anyone considered the impact of this strategy on the qualified business income deduction (Section 199A)? I'm in a similar situation and was told that large Section 179 deductions can potentially reduce my QBI deduction, partially offsetting the benefit. Also wondering about how this affects social security tax planning. If you're reducing taxable income dramatically through the S-corp with these equipment deductions, are you also reducing your future social security benefits?