Will I be able to file Section 179 for my seasonal franchise due to the equipment and marketing platform that I pay monthly for?

Feb 26, 2019
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I bought a franchise called Knockerball in November 2018, and I haven’t gotten much business because it’s more of a seasonal thing. Will I be able to file Section 179 for my franchise this year due to the equipment and marketing platform I pay for monthly?

Whether or not a Section 179 deduction can be taken depends on all facts and circumstances of your case, so it’s difficult to provide a complete answer without more details. 

However, based on you noting that you “haven’t gotten much business,” you should assess if a business or a hobby was acquired/operated during the tax year. The IRS provides criteria to assess a hobby vs. a business, and the PICPA has also published a blog on the topic.

If said franchise meets the definition of a business, then the question regarding allowable Section 179 applies. Again, this depends on your facts and circumstances. Based on the limited knowledge you shared, “the equipment I pay monthly for” seems to imply you are renting the equipment. Generally, Section 179 is not allowed for rental property, but certain exceptions may apply.
 
I recommend that you seek assistance from a tax professional, and be sure to provide all your information on your franchise.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Anthony P. Petrozino, CPA, is a senior associate with CBIZ MHM LLC in Plymouth Meeting, Pa.

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