Can we carryover a disallowed section 179 deduction for equipment over phase-out threshold?

Thanks so much for the clear explanation! So just to make sure I understand correctly - our $1.16 million deduction doesn't disappear forever, we can use it in future years? And we need to track which specific pieces of equipment it's tied to?

Yes, your $1.16 million deduction isn't lost forever - you can carry it forward indefinitely until you're able to use it. This is one of the nice features of Section 179. You do need to track which specific assets the carryover relates to. This is important because different assets have different recovery periods and other characteristics that affect how the deduction can be used in future years. I recommend creating a spreadsheet that lists each piece of equipment, its cost, placed-in-service date, and how much of the Section 179 deduction was disallowed for each item.

Did it help with figuring out the best way to allocate the carryover in future years? My business is facing a similar issue and I'm not sure if I should try to use the carryover as soon as possible or spread it out strategically.

I'm a bit skeptical about these tax AI tools. How accurate was it compared to what a CPA would tell you? I've been burned before by tax software that missed important details.

It actually did help with allocation strategies. The system showed me different scenarios for using the carryover in future years and how each would impact my tax liability. It suggested I could optimize by using some of the carryover in years where I expected higher income, rather than just using it all as soon as possible. As for accuracy compared to a CPA, I actually had my accountant review the report, and he was impressed. He said it caught some nuances about asset classification that even he might have overlooked. The difference is it's not just generic tax software - it specifically focuses on business asset deductions and Section 179/bonus depreciation scenarios. It saved me money because my CPA spent less time on the analysis part and more time on strategic planning.

How does this actually work? Seems kind of impossible that they could get you through to the IRS that fast when I've been on hold for literally hours.

Sorry, but I find this hard to believe. I've tried EVERYTHING to get through to the IRS. There's no way some service can magically get you to the front of the line when millions of people are calling. Sounds like snake oil to me.

It works by essentially calling the IRS and waiting on hold for you. Their system navigates the phone tree and sits in the queue, then when an actual agent comes on the line, it calls you so you can join the conversation. You don't have to sit there listening to the hold music for hours. I was skeptical too, which is why I tried it. I had spent multiple days trying to get through myself with no luck. The difference is they have multiple lines calling simultaneously and have figured out the best times to call for different departments. When you think about it, it's not cutting the line - it's just a more efficient way to wait your turn without wasting your time.

That's a really good point I hadn't considered! Would the bonus depreciation apply to all of the $4.1 million in equipment, or is there a limit on that too? And if we use bonus depreciation, does that affect our ability to use the Section 179 carryforward in future years?

The bonus depreciation would apply to all of your $4.1 million in equipment purchases, as there isn't an investment ceiling like with Section 179. The only requirements are that the property must be eligible (which most business equipment is) and placed in service during the tax year. If you use bonus depreciation instead of Section 179 this year, you wouldn't have a Section 179 carryforward because you wouldn't have elected Section 179 in the first place. It's an either/or decision for each specific asset. For your situation, with such a large equipment investment, bonus depreciation might be more beneficial since you can deduct 80% of the full $4.1 million cost immediately, rather than waiting to use the Section 179 carryforward. Remember that bonus depreciation is gradually phasing down (60% in 2025, 40% in 2026), so using it while the percentage is higher might be strategic.

This is so true! I learned this the hard way last year. Didn't properly elect Section 179 because I thought "why bother" since it was completely phased out. My accountant caught it this year but said we lost the ability to carry forward about $320k in deductions. Check your 4562 carefully!!

Exactly! You need to complete Part I of Form 4562, listing all the property for which you're electing Section 179. The form will walk you through calculating the limitation and will show the carryover to next year. Even though the deduction for the current year might be reduced to zero because of the investment limitation, making the election is what establishes your right to the carryover. I've seen too many businesses miss out on significant future deductions simply because they didn't complete this paperwork correctly. These formal elections matter tremendously in tax law, even when they don't provide an immediate benefit.