Section 179 Addback Example 1-Sole Proprietor

For his Minnesota return, Mack will have to use the Worksheet for line 12a in Schedule M1NC to make any possible adjustments from the federal return. In this example, Mack does not make an adjustment on Schedule M1NC because the property placed in service is qualifying property and does not exceed the recognized section 179 property thresholds.

After completing the Worksheet for Line 12a in Schedule M1NC, Mack will have a Minnesota NC 4562 which is needed to complete the Worksheet for line 4 – Section 179 Expensing Modification on Schedule M1M.

Example 1 Result

Mack’s Minnesota addback for 2018 is $44,000 (step 4 from the Worksheet for Line 4, pictured). Mack will be able to subtract 20 percent of the amount he added back in 2018 in each of the next five years. This would be $8,800 ($44,000 x 20%) in tax years 2019 through 2023.

In the first year, Minnesota section 179 expenses are limited to $36,000. This includes the $25,000 limitation for Minnesota purposes and 20 percent of the amount on step 3 from the Worksheet for Line 4.

 When the $20,000 carryover from line 13 of Mack’s federal Form 4562 is used, he may have a section 179 expensing addback in that year if there are other items that are expensed and the total exceeds the $25,000 Minnesota limit.