Where do you report Section 179 truck deduction on IRS tax forms for partnerships?
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For partnerships, the Section 179 deduction for trucks (or any other qualifying property) is not claimed directly on the partnership’s own tax return as a partnership-level deduction. Instead, the partnership passes the Section 179 deduction through to its partners, who then claim the deduction on their own tax returns, subject to their individual limitations.
Here’s how the Section 179 deduction for a truck is reported on IRS tax forms for partnerships:
1. Form 1065 (U.S. Return of Partnership Income):
The partnership calculates the allowable Section 179 deduction for all qualifying property (including trucks) placed in service during the year. The total Section 179 deduction is reported on Form 1065, Schedule K, Line 12 (“Section 179 deduction”). This is a separately stated item, not included in the partnership’s ordinary business income or loss on page 1 of Form 1065. The partnership must also complete and attach Form 4562 (Depreciation and Amortization) to Form 1065. Part I of Form 4562 is used to compute the Section 179 deduction, and the partnership’s total Section 179 deduction is shown on line 12 of Form 4562. The partnership attaches Form 4562 to its Form 1065 return.
2. Schedule K-1 (Form 1065) (Partner’s Share of Income, Deductions, Credits, etc.):
Each partner’s share of the Section 179 deduction is reported in Box 12 of Schedule K-1 (Form 1065), using code “I” for Section 179 deduction. The partnership must provide an attached statement to each partner’s K-1 showing the partner’s share of the cost of Section 179 property placed in service during the year, including the truck, and any other information needed for the partner to properly claim the deduction and apply the limitations.
3. Partner’s Individual Tax Return:
Each partner receives a Schedule K-1 showing their share of the Section 179 deduction. The partner then reports the Section 179 deduction on their own tax return (for individuals, this is typically on Form 1040, Schedule E, and Form 4562), subject to the partner’s own Section 179 limitations (such as taxable income limitation and basis limitation).
4. Summary of Reporting Steps:
- Form 1065, Schedule K, Line 12: Total partnership Section 179 deduction (including trucks).
- Form 4562 (attached to Form 1065): Details and computation of Section 179 deduction.
- Schedule K-1, Box 12, Code I: Each partner’s share of the Section 179 deduction.
- Partner’s own return: Partner claims the deduction, subject to limitations.
Special Notes:
The partnership must reduce the basis of the truck by the amount of Section 179 deduction elected, even if a partner cannot use the full deduction due to their own limitations. Estates and trusts cannot claim the Section 179 deduction, so if a partner is an estate or trust, the partnership does not allocate Section 179 to them.
In summary: The Section 179 truck deduction is reported on Form 1065, Schedule K, Line 12, and on each partner’s Schedule K-1, Box 12, Code I, with details on Form 4562 attached to the partnership return. Each partner then claims their share on their own tax return, subject to limitations.
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