Which of the following statements regarding the Section 179 expense deduction is correct for the current year?

Answer options:

It can create a net operating loss for the business.

It applies to all real property.

The deduction is phased out dollar-for-dollar if total equipment placed in service exceeds a specific threshold.

It is not available for used equipment.

How to approach this question

Section 179 Limits: 1. Dollar Limit (Max deduction). 2. Investment Limit (Phase-out if you buy too much). 3. Income Limit (Cannot create a loss).

Full Answer

C.The deduction is phased out dollar-for-dollar if total equipment placed in service exceeds a specific threshold.✓ Correct

The Section 179 deduction is limited by the amount of qualifying property placed in service. If the cost of property exceeds the investment threshold, the deduction is reduced dollar-for-dollar. Also, Section 179 cannot exceed taxable income from the trade or business.

Common mistakes

Thinking Section 179 can create a loss (Bonus Depreciation can, Section 179 cannot).

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