 Subtract the hypothetical other deduction figure in step four from the taxable income figured in step one, six, figure your actual 179 deduction using the taxable income figured in step five, seven, subtract your actual section 179 deduction figured in step six from the taxable income figured in step one, and finally eight, figure your actual other deduction using the taxable income figured in step seven. Okay, carryover of disallowed deduction. You can carry over for an unlimited number of years the cost of any qualified section 179 real property that you placed in service in tax years beginning after 2015 and that you elected to expense but were unable to deduct because of the business income limitation. So this disallowed deduction amount is shown online 13, a form 4562. You use the amount you carry over to determine your section 179 deduction in the next year. Enter that amount online 10 of your form 4562 for the next year. If you place more than one property in service in a year, you can select the properties for which all or part of the cost will be carried forward. Your selections must be shown in your books and records for this purpose treat section 179 costs allocated from a partnership or an S corporation as one item of section 179 property. So clearly when we think about the different kind of business entities, you know, the partnership is a flow through entity as is a an escort kind of situation. So if you do not make a make a selection, the total when I say flow through entity, meaning they flow through from the the other tax return instead of being taxed at the S corporation level or partnership level, they flow through with a K one form to the form 1040s and then are taxed on the form 1040. So the total so the total carryover will be allocated equally among properties you elected to expense for the year. If costs from more than one year are carried forward to a subsequent year in which only part of the total carryover can be deducted, you must deduct the costs being carried forward from the earliest year first. All right, special rules for qualified section 179 real property like real estate, typically property. So you can carry over to 2023 a 2022 deduction attributable to the qualified section 179 real property that you placed in service during the tax year and that you elected to expense but were unable to take because of the business income limitation. See carry forward of disallowed deduction earlier. Thus the amount of any 2022 disallowed section 179 expense deduction attributable to qualified section 179 real property will be reported online 13 a form 4562. And then how do you elect the deduction? You elect to take the section 179 deduction by completing part one of form 4562 software obviously is helpful and useful to try to guide you through the process here and then you can kind of deconstruct it will possibly look at some software examples in future presentations to get an idea. So the property placed in service in 2022 file form 4562 with either of the following your original 2022 tax return whether or not you file it timely and amended return for 2022 filed within the time prescribed by law. So an election made on an amended return must specify the item of section 179 property to which the election applies and the part of the of the cost of each such item to be taken into account. The amended return must also include any resulting adjustments to taxable income. So in other words you would like to do it when you file the actual tax return but if you have to if you didn't take it and you need to go back and amend it then you might be able to amend the tax return in order to properly make the election. So election for qualified section 179 real property you can elect to expense certain qualified real property that you placed in service as section 179 property for tax years beginning in 2022. For more information see election above also see revenue procedure 2019-8 on page 347 of internal revenue bulletin 2019-3 2019-3 available at the IRS website. Revoking an election it's possible to revoke the election an election or any specification made in the election to take a section 179 deduction for 2022 can be revoked without IRS approval by filing an amended return as you would kind of expect. Why would you do that? Maybe you you elected the 179 deduction and and you figured that it wasn't actual a beneficial thing or possibly you didn't qualify for it and you want to correct the situation amend the return. So the amended return must be filed within the time prescribed by law the amended return must also include any resulting adjustment to taxable income that's the standard process for an amended return once made the revocation is irrevocable that sounds quite definite. So when must you recapture the the deduction you you may have to recapture the section 179 deduction if in any year during the properties recovery period the percent of the business use drops to 50 percent or less. So this is another kind of strange situation when they do these when they do these kind of weird deviations of a normal accounting process of this big depreciation up front you can imagine a situation where someone has a business and they basically take this massive 179 deduction but then they change the property from business use property to personal property so now it's personal property not business property anymore and you used it to take this massive business deduction related to it in the prior year which you only got the massive business deduction because they allowed you this massive front-year loading of the deduction which normally should have been allocated from normal accounting principles over the useful life of the equipment. So so now so so then you might have to recapture it in that case so in the year the business use drops to 50 percent or less you include the recapture amount as ordinary income in part four of form 4797 so it's probably fairly unusual of a situation but you can imagine why they need it there because if they didn't put it there people might try to manipulate the tax code and cheat you know a little bit you would think and that might be one way to people try to manipulate the system so you also increase the basis of the property by the recapture amount so then you have a basis adjustment of course because you don't get the in essence the deduction recovery periods for property are discussed under which recovery period applies in chapter four figuring the recapture amount to figure the amount to recapture take the following steps one figure the depreciation that would have been allowed on the section 179 deduction you claimed begin with the year you placed the property in service and include the year of recapture to subtract the depreciation figured in one from the section 179 deduction you claimed because you don't get that you're gonna have to reverse that the result is the amount you must recapture example let's check it out in january 2020 paul lamb a calendar your taxpayer bought and placed in service section 179 property costing ten thousand dollars the property is not listed property the property is three-year property so paul elected a five thousand dollar section 179 deduction for the property and also elected not to claim a special depreciation allowance we'll talk about special depreciation later paul used the property only for business in 2020 and 2021 in 2022 paul used the property 40 percent for business and 60 percent for personal use so paul figures so now what they felt he fell below the 50 percent business use uh-oh recapture point so paul figures the recapture amount as follows you got the 179 deduction claimed in 2019 was five thousand so mine is allowable depreciation using table one a which i'm not going to jump to here but you got the 2020 10666 50 2021 2022 and that's going to give us the total of the the 4180 520 so the recapture amount then at the 8 at the 814 80 so paul must include then the 814 dollars and 80 cents in income for 2022 so not i'm not a totally common scenario but you can imagine that scenario coming up from time to time