4 – Part 1 line 1 to 5 Form 4562
Line 1: Maximum of cost or basis of properties placed in business during the year you will claim section 179 expense deduction
The maximum is $1,040,000
Enter your total and no more than $1,040,000 (max for 2020)
Recapture:
If you claimed section 179 on a property that could have been depreciated over 5 years, and later you took it out of your business 3 years later, the remaining 2 years depreciated amount would be reported as other income in your tax return.
Section 179 is great if your business is profitable, and you would like to lower your taxable profit.
However, if your business is at its early stage with low revenue, it might be advisable to depreciate your depreciable items instead. However, keep in mind that you could carryover section 179 to futures years if you didn’t take it all or you could choose to use section 179 on part of the property cost as well and depreciate the rest.
The worksheet on page 4 of instructions to Form 4562 Depreciation and Amortization, could help calculate amount for line 1.
Line 2: enter the total of all properties you would like to claim section 179 for, including listed property from Form 4562-Part V that you used more than 50% in your business. Also include real property your spouse placed in service during the same year and would like to claim section 179 for, even if you both would file separate returns.
Enter the amount on line 2 and it should be the same amount as line 1 on worksheet 1. It could be the same as line 1 of Form 4562 if it is less than $1,040,000.
Line 3: enter the threshold amount. For 2020 it was $2,590,000.
Line 4: line 2 – line 3: If it is $0 or negative, enter 0
Line 5: Line 1-line 4. If it $0 or negative, enter 0. Skip line 6 to 11. Enter on line 12. You cannot take the deduction.
Line 5 is more than $0, enter the full amount. Go to line 6.
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2020 Federal Tax Forms and Instructions
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