Question

On July 20, 2018, Kelli purchases office equipment at a cost of $12,000. Kelli elects out of bonus depreciation but makes the election to expense for 2018. She is self-employed as an attorney, and, in 2018, her business has a net income of $6,000 before considering this election to expense. Kelli has no other income or expenses for the year. What is the maximum amount that Kelli may deduct for 2018 under the election to expense, assuming she elects to expense the entire $12,000 purchase?

Answer 1

Kelli can deduct up to $6,000 in expenses from her net income, so her net income for this year would be $0. She could have deducted an even larger amount if her net income had been higher (up to $12,000 in deductions), since you can only deduct up to the amount of your net income.