Can a startup business with no revenue qualify for Section 179 deduction?
So I started my small consulting business about 3 months ago and I'm not making any actual income yet. Still setting everything up and trying to get clients. I've spent about $12,800 on equipment (mostly computers, software, and office furniture) and was hoping to use the Section 179 deduction to write off these expenses this year. My accountant friend mentioned something about needing actual business income to qualify, but I thought Section 179 just required the equipment to be for business use? Do I need to actually be turning a profit to claim this deduction? My spouse makes good money so we have income to offset the deduction against on our joint return, if that makes a difference. Any advice would be appreciated because I'm trying to figure out my tax plan before year-end!
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Nia Thompson
Your accountant friend is partially right. To utilize Section 179, you need to have business income, but it doesn't need to be profitable. The deduction can't exceed your business income for the year - this is called the "taxable income limitation." If your business has zero income currently, you can't take a Section 179 deduction this year. However, don't worry! You're not losing the deduction. You can still depreciate those assets over their useful life (usually 5-7 years for computers and office equipment). Alternatively, when your business starts generating income next year, you might be able to take the Section 179 deduction then. Your spouse's income won't help for Section 179 specifically because the limitation applies at the business activity level before it flows to your personal return. But the regular depreciation deduction can still offset other income on your joint return.
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Mateo Rodriguez
•So if I make just $500 in business income this year, does that mean I can only deduct $500 with Section 179? Or am I misunderstanding how it works? Also, if I start making decent money next year, can I claim the full Section 179 deduction then, or is it only for the year you purchase the equipment?
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Nia Thompson
•You understand correctly - if you make $500 in business income, your Section 179 deduction would be limited to $500 for this year. Unfortunately, Section 179 is only available in the year you place the equipment in service. If you can't use it fully this year, you can't carry forward the Section 179 election to next year for these same assets. However, you can still claim regular depreciation on these assets over their useful life, which will give you deductions for several years. So the deduction isn't lost - it's just spread out over time rather than taken all at once.
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Aisha Abdullah
When I was in a similar situation with my startup, I used https://taxr.ai to help me understand all my options with business equipment deductions. I had bought about $15k in equipment but only made $3k my first year. The tool analyzed my business finances and provided clear guidance on how to maximize my deductions between Section 179, bonus depreciation, and regular depreciation. It also explained what documentation I needed to keep for each option.
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Ethan Wilson
•How exactly does this work? I'm in a similar situation and wondering if it would help me. Does it just give general advice or does it actually look at your specific situation? Did you need to upload financial documents or anything?
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NeonNova
•I'm skeptical about tax tools that aren't mainstream. Did you find the advice was accurate? I got burned last year using some random tax app that misclassified my business expenses and nearly got me audited.
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Aisha Abdullah
•It analyzes your specific situation based on the information you provide. You can upload documents like receipts and financial statements, and it uses AI to extract the relevant information. It then provides personalized recommendations based on your exact circumstances, not just general advice. The advice was definitely accurate in my case. It cited specific IRS publications and tax code sections for each recommendation. What I liked was it showed me multiple scenarios - like what happens if I take Section 179 now vs. regular depreciation, and the impact on my taxes over multiple years. It's actually backed by tax professionals who review the AI guidance.
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NeonNova
Just wanted to follow up - I decided to try https://taxr.ai after my initial skepticism and I'm really impressed! It analyzed my business equipment purchases and showed me that in my case, regular depreciation actually worked better than Section 179 given my minimal income this year. It projected my tax benefits over 5 years and showed exactly how much I'd save each year. The document analysis feature saved me hours of sorting through receipts and invoices. Definitely worth checking out if you're struggling with these Section 179 questions!
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Yuki Tanaka
If you're having trouble getting clear answers about Section 179 from the IRS website, I'd recommend using https://claimyr.com to get through to an actual IRS agent. I was in the exact same situation with my new photography business - spent thousands on equipment but barely any income. Tried calling the IRS business helpline for days with no luck. Claimyr got me connected to an agent in about 25 minutes when I had been trying for literal weeks on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they wait on hold so you don't have to. The agent I spoke with gave me specific guidance for my situation.
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Carmen Diaz
•Wait, you actually got through to a real IRS person? I've literally never been able to get a human on the phone there. How much does this service cost? Seems too good to be true honestly.
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Andre Laurent
•This sounds like an ad. Did you actually get useful information from the IRS agent? In my experience, they just read from the same scripts we can find online and rarely give specific advice on tax strategies.
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Yuki Tanaka
•Yes, I got through to an actual IRS representative who specialized in small business tax issues. The system calls you back when an agent is on the line, so you're not wasting your day on hold. The agent was actually really helpful. She walked me through the specific requirements for Section 179 and explained how the business income limitation works in detail. She even mentioned some alternatives I hadn't considered, like bonus depreciation, which has different rules than Section 179. It wasn't just script reading - she answered my specific questions about my startup situation.
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Andre Laurent
I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I had some questions about my own business equipment deductions. The service got me through to an IRS tax specialist in about 30 minutes, which is INSANE considering I've spent hours on hold before only to get disconnected. The agent confirmed exactly what I needed to know about Section 179 for my startup and even helped me understand how to document my business use percentage properly. I was able to get specific guidance for my exact situation instead of trying to interpret vague IRS publications. Definitely changed my approach to dealing with tax questions!
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Emily Jackson
Here's a potential workaround - can you do some consulting work before year-end and generate at least some business income? Even if it's just a few thousand dollars, that would give you at least some Section 179 deduction to use this year. You could offer discounted services to get your first clients. The rest of the equipment cost would still be depreciable over time.
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Liam Mendez
•Another option might be bonus depreciation instead of Section 179. It doesn't have the same income limitation as Section 179. For 2023 it's 80% of the purchase price and there are talks about possibly increasing it again. Anyone know if this would work better for a startup with no income?
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Emily Jackson
•Bonus depreciation is a great alternative to consider! You're right that it doesn't have the same taxable income limitation as Section 179. However, any depreciation (including bonus) can potentially create a net operating loss for your business, which has its own set of rules for how it can offset other income. The 80% bonus depreciation for 2023 means you could immediately write off 80% of the qualified property's cost, and then depreciate the remaining 20% over its regular useful life. This would give you a significant deduction even without business income, though your ability to use that deduction against other income will depend on your overall tax situation and how your business is structured.
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Sophia Nguyen
Has anyone used TurboTax Self-Employed to handle this Section 179 situation? I'm wondering if it calculates all these limitations correctly or if I need to work with an actual accountant this year.
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Jacob Smithson
•I used TurboTax Self-Employed last year for my business and it handled Section 179 pretty well. It asked about business income first and then limited my Section 179 deduction automatically. It also gave me the option to choose regular depreciation instead. Just make sure you have all your receipts organized before you start!
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Jamal Brown
I went through this exact situation last year with my web design business! Started with zero income but had about $8,000 in equipment purchases. What I learned is that you have a few solid options: 1. **Generate some income before year-end** - Even a small project could give you partial Section 179 benefits. I did a quick logo design for $800 just to have some business income. 2. **Consider bonus depreciation** - As others mentioned, it doesn't have the income limitation. For 2023, you can write off 80% immediately without needing business income. 3. **Regular depreciation works too** - You'll get the deduction spread over 5-7 years, which actually worked better for my tax situation since I expected higher income in future years. The key thing is don't panic about "losing" the deduction - you're not. It's just a matter of timing and which method works best for your overall tax strategy. I'd definitely recommend running the numbers on all three scenarios to see what maximizes your benefit over the next few years.
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Asher Levin
•This is really helpful advice! I'm curious about your experience with generating that small amount of income - did you have to worry about establishing business legitimacy with the IRS for just an $800 project? I've heard mixed things about whether you need to show a profit motive and consistent business activity, especially in the first year. Also, when you say bonus depreciation worked better for your future tax situation, was that because you expected to be in higher tax brackets later, so the deduction would be more valuable then?
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