Hi. I'm a resident planning to start moonlighting next year as an indie contractor. For the moonlighting I'll be bringing in my own equipment. I'm thinking of getting a new laptop and a new PDA solely for my moonlighting assignments. Do you think I can take the Section 179 deduction this year (TY 2006)? I've heard that I can do the Section 179 against my regular employee income this year from the hospital --- even though I have no contractor income yet. Muchas gracias.

Zip Code: 02114

I think you'd be better off waiting until 2007 to purchase the equipment. Here are the basics:

If you purchase equipment and put it into business use the same year, you can write off up to the first $108k of equipment purchased annually. This tax break is known as the Section 179 deduction.

If you purchase equipment one year, and put it into business use the following year, you can't claim the Section 179 deduction, and instead, you need to depreciate that equipment over its useful life of 5 or 7 years.

What if you purcahse the equipment this year? Yes you could take the cost of this equipment against your salary, but you don't get nearly the bang for your buck. Instead of writing off the cost of the equipment directly against your moonlighting income, you need to claim it as a miscellaneous itemized deduction which is only deductible to the extent it exceeds 2% of your income, is not allowable when calculating the Alternative Minimum Tax, and won't benefit you unless you'll be itemizing this year.

So I vote to hold off until 2007 if you'll start moonlighting that year and will be compensated as an independent contract.

I see you're from the Boston area. During our January 31st talk at the Brookline Holiday Inn, I give a 45 minute presentation on Moonlighting and Deducting Professional Expenses. For more info, check out www.mdtaxes.com/meeting. We have 9 speakers lined up for the presentation. Maybe we'll see you there.

Zip Code: 01801