Deducting Fixed Asset Value from the Net Profit

Ugur01 · ‎December 25, 2024

Hi,

My client is operating restaurant and the company has just started its operation in 2024. The company has $43,000.00 net profit in 2024. Besides its fixed asset value is $37,000.00 like oven, fridge, machinery etc.

Can we deduct all of this fixed asset value from the net profit?

FishingForAnswers · ‎December 26, 2024

@Ugur01 Not anymore.

While it was possible in the past to take 100% bonus depreciation on certain types of fixed assets under certain circumstances, they have begun phasing that out in recent years, going from 100%>80%>60%>40%>20%, and then to just normal depreciation.

As a result, you will only be able to claim part of the value of the fixed assets in question as depreciation expense.

The exact amount each year depends on the type of asset in question, its useful life, the day you started using it, and some other factors.

View solution in original post

FishingForAnswers · ‎December 26, 2024

@Ugur01 Not anymore.

While it was possible in the past to take 100% bonus depreciation on certain types of fixed assets under certain circumstances, they have begun phasing that out in recent years, going from 100%>80%>60%>40%>20%, and then to just normal depreciation.

As a result, you will only be able to claim part of the value of the fixed assets in question as depreciation expense.

The exact amount each year depends on the type of asset in question, its useful life, the day you started using it, and some other factors.

Rainflurry · ‎December 26, 2024

@Ugur01

If you're asking that question on this forum, hopefully your client has a CPA that is preparing their tax return and can discuss the pros and cons of the various methods of depreciation. This is not a tax forum. You can take a Section 179 deduction for equipment not to exceed net income. However, a Section 179 deduction reduces their tax basis so that should be discussed with a tax professional. If the business just started in 2024 and made "only" $43K, depreciating the equipment in future years, when the business has higher net income, generally becomes more valuable because your client will most likely be in a higher marginal tax bracket. This depends on your client's overall income from all sources and filing status so make sure you know what you're doing before just taking the full $37K as a Sec. 179 deduction.

Ugur01 · ‎December 27, 2024

Thank you.

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Deducting Fixed Asset Value from the Net Profit