The total cost of property that may be expensed with a Section 179 deduction for any tax year cannot exceed the total amount of your taxable income that you get from the active conduct of any trade or business, including any salary or wages from other jobs you (or your spouse) may have. So, if your business is facing a loss, you may not get the full benefit of the expensing provision. Costs that are disallowed can be carried forward to the next year, so the fact that this income limitation rule knocks out a portion of your expensing deduction does not mean that it is permanently lost.
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The way in which taxable income is computed under the expensing rules may especially benefit a small business owner who operates the business in either an unincorporated form (a sole proprietorship or partnership) or as an S corporation. This is because in determining the taxable income limit of such taxpayers, all wages and income are included — even those from another job or separate business activity. Married business owners filing joint returns can also count their spouses' wages and business income.
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