Giving back your Section 179 deductions

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. My wife started a home-based business a couple years ago that didn’t work out. We bought a computer, office furniture and equipment. Do we have to pay tax if we keep them? A.T., Galveston, Texas

A. Probably. You didn’t say so, but we’re assuming you claimed the Section 179 expensing deduction for those business assets. In that case, you must recapture some of the tax benefits for your conversion to personal use. Generally, the amount recaptured is the difference between the claimed Sect. 179 deductions and the regular depreciation deductions that could have been claimed while the business was in operation. Tip: If you claimed regular depreciation deductions instead, you generally owe tax to the extent you realize a gain on the disposition.

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