John began using his home for business in January of this year. He purchased a new computer and filing cabinet to use in his business. The computer, used 100% for business, cost $3,200. The filing cabinet cost $600. John elects to take the section 179 deduction for both items.
John completes Part I of Form 4562. He enters the cost of both the computer and filing cabinet, $3,800, on line 2 and completes lines 4 and 5. On line 6, he enters a description of each item, its cost, and the cost he elects to expense. Line 11 is the smaller of line 5 ($100,000) or the taxable income from all trades and businesses without regard to the section 179 deduction. Since he has no other business income, he adds line 31 of Schedule C and the amount of the section 179 deduction ($3,800) for a total business income of $27,871. This amount goes on line 11 since it is smaller than $100,000. He enters $3,800 on line 12.
Form 4562 Example
Form 4562, Part I, lines 1-13
Form 4562, Part III, line 19c
Form 4562, Part III, line 19i
Form 4562, Part IV, line 22
Schedule C Example
Schedule C, Line 13
Schedule C, Line 16b
Schedule C, Line 25
Schedule C, Lines 28-30
Form 8829 Example
Form 8829, Part II, Step 1
Form 8829, Part II, Step 2
Form 8829, Part II, Step 3
Form 8829, Part II, Step 4
Information courtesy of the Internal Revenue Service.
