CPA Reducing Schedule C Depreciation amount from 19K to 1,622?

Question

My CPA Firm has done my taxes for 3 years. Its signed off by someone knowledgeable and worked on by "Tax Managers" and "Tax assistants".

I operate Recovery Residences and provide furnished properties.  My Company (schedule c) sources/vets occupants ,provides /pays for everything, collects the Guest Fees from Individuals. Handles like any Property Management Company would.  My Company pays me rent, (reported on Schedule E). Schedule E shows little to know expenses except for major repairs.  I have REPS status.

In 2024 I purchased another home.
The Company had to purchase $19K to furnish it. I would like to depreciate using 179. I reported 19K on line 13. Gave to my accountant. Provided receipts. I'm buying another home, and need as much as possible on Line 13 as an add back for Lending

At first he disregarded the entire amount and put in last years carried forward depreciation of $1,346

I asked to reflect accurate number of $19K again explaining its an addback for me.

He changed the number to $16,962.  His answer below:

Hi,

Thank you for reaching out to us with your query.

Regarding your question, yes, we can capitalize the expenses of $19,398 and depreciate them under Section 179. However, please note          that due to business income limitations, the maximum deduction allowed is $16,962. The total depreciation flowing under line 13 will              be $18,308, which also includes depreciation for the furniture placed in service in 2023.

what is he doing and why?   I don't care how he jiggles on the back end. Schedule C line 13 should have $19 k on it, NO?

Am I missing something that is in my best interest that he's doing? Isnt everything carried forward? Business is in operation for two years, if he's interested in me finally showing a tiny profit, why wouldn't he suggest full amount Line13 and reduce my "office expenses"?

I like to defer to experts but this makes no sense.  What they do on the back end I don't care.  My lender doesnt care.  I need $19 K on Line 13

Any advice would be appreciated!

Drew Sygit · Answer

@Amy Konopka why aren't you setting up a call or meeting with your CPA to explain this to you?

Michael Plaks · Answer

@Amy Konopka

Impossible to give you an accurate answer without reviewing your tax return, so this reply is based on assumptions picked from your description.

If your only taxable income comes from this Schedule C, I do not know how you would qualify for any loan anyway, even with a ~$20k profit after adding back depreciation. If you also have W2 income, then Section 179 income limitation on Schedule C should not matter.

Also, whether you take $1k of depreciation or $19k of depreciation, after adding it back you have the exact same income for underwriting purposes, so I'm not sure why you're concerned about a reduced amount of depreciation.

Natalie Kolodij · Answer

You really need to talk to your CPA to find out why they are doing what they are doing. A good tax professional won't just put a number on a line because you told them to; but if they're reporting something differently for a valid legal reason a good tax professional should also be able to explain to you exactly why.

Michael Plaks · Answer

You start with $30k income (or whatever your number is) before depreciation.

A. You take $2k of depreciation. Now your income for tax purposes is $28k. But when you add back $2k depreciation for underwriting, you have $30k.

B. You take $20k of depreciation. Now your income for tax purposes is $10k. When you add back $20k depreciation for underwriting, you have the same $30k.

See - how much depreciation you take does NOT change the number used for underwriting.

And back to my skepticism - check with your lenders if you can qualify for any loan based on your income. You might be too optimistic, I'm afraid.

Ashish Acharya · Answer

@Amy Konopka It sounds like your CPA is adjusting your Section 179 deduction based on your business income limitation—which makes sense from a tax perspective, but may not align with what you need for lending purposes.What’s Happening?

• Section 179 allows immediate expensing of assets, but the deduction is limited to your taxable business income.
• If your net business income (before the deduction) is only $16,962, then that’s the max you can claim in the current year—the rest carries forward to future years.
• The $18,308 total includes both this year’s deduction and carryover depreciation from last year’s furniture.

Why This Matters for You:

• Your lender wants to see $19K on Line 13 as an add-back for cash flow purposes.
• Your CPA can’t legally put the full $19K if your business income limits the deduction.
• However, reclassifying some expenses (like moving office expenses into capital assets) could increase your taxable business income, allowing more Section 179 deduction this year.

Discuss with your CPA about reclassifying expenses (e.g., reducing "office expenses") to allow more Section 179 depreciation. Consider bonus depreciation, which isn’t limited by business income. If lender optics are the priority, communicate that upfront—there may be a compliant way to structure the return to meet both tax and financing goals. Your CPA should balance tax strategy with your lending needs, so push for a solution that works for both.This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Jay Hurst · Answer

The "magic" you are mentioning IS adding back the depreciation upping your income. what @Michael Plaks is saying is 100% correct in that your INCOME to be used for the debt to income would be exactly the same in this case because if not paper loss is shown (the deprecation) then there is no loss to add back, so you get credit for the income.  No different. Now, I am a lender so I know how it effects your debt to income but not a CPA so not idea which approach is correct from a tax perspective but it will not have any change on your DTI.

Natalie Kolodij · Answer

Like Michael said there's no way to know the answers without actually reviewing your taxes. No one will be able to confirm the treatment or what's best or accurate. Just to clarify-Are you simplifying the amount to $19k for this explanation (But gave him an exact figure)....or did you put $19k on your line item to him but the receipts totaled $18,308 when he added them?

Aaron Zimmerman · Answer

Agreed with the others in this post. You need to get with your cpa to discuss. Section 179 is generally limited to the business income of the entity.

Amy Konopka · Answer

Thank you, and that's what they explained, but without knowing as much about taxes as they do, my first thought was "well can't I reduce the number in my "repairs" line to increase the deduction "number" in my depreciation line?    Especially since I made it clear up front I'd like to keep my depreciation line high for addbacks.

Amy Konopka · Answer

That's a great question! My cpa uses tax managers . We email back and forth, the CPA is CC'd. I don't want to doubt them or call them out, but last year I had to explain to them HoH rules (that you can actually claim HoH without claiming a dependent with a Qualifying Person--common in divorces-) and ask them to take it to the CPA who signs off on my returns. But I chalked it up to a newbie. This year they missed a Form 4562 for one of my properties. I had to ask them to locate and include it. So now they've lost credibility.   For $2800 I would expect maybe a phone call to get the questions answered by a CPA.

What would be a good question to ask them?  How can I reduce my income by $4,000 to qualify for the EITC?

CPA Reducing Schedule C Depreciation amount from 19K to 1,622?

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