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179 Vehicle deductions and other vehicle deduction questions

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  •  wp746911 
    Participant
    Status: Physician
    Posts: 21
    Joined: 04/04/2016

    Wife has a well established ‘tax home’ at our house (main job is telerad-1099). She will be driving (for radiology on site coverage- also 1099 ) to other cities ~400 miles/month, might be as high as 1000 miles/month. I have a ‘regular’ W2 day job at a hospital in the city I live (my ‘tax home’). I also have some side 1099 contractor income in surrounding cities which has be drive about 100 miles/month to other cities.

    1) Both our driving (for our 1099 jobs, to other cities) should qualify as a business expense. My main concern is my miles- me driving for my 1099 to other cities (not my regular w2 job commute miles) would be a business expense since my main job is my tax home, right?

    2) Our plan- we buy a tesla X this year (100k) and title it in our names, paid for out of our private bank account. It should arive near the end of this month. We will make sure we drive it only for business this year (will likely only be 100-200 business miles). Then we will use 179 to get the full price (100k) written off. To maintain the business car status we will make sure and keep business usage over 50%. When we sell it, there will likely be some reclaiming to deal with.

    a) My main concern is buying it in our names rather than through a LLC- is that ok? I’ve seen some sites mention that you should buy it through your businesss, but I don’t see any docs from the IRS saying the IRS cares (as long as you can prove your mileage usage). I do have an LLC but haven’t setup my businesses through it yet, and wife isn’t added to it yet.

    b) Would the IRS care that we deducted 100k for a SUV in a year that we owned it for maybe 2 weeks and 200 business miles? Techincally it seems kosher, but…

    c) the 179 would exceed our 1099 income this year- I assume we can carry the extra amount forward into next year?

    d) we could use both our mileage toward the 50% cutoff?

     

    #171369 Reply
    Dreamgiver Dreamgiver 
    Participant
    Status: Physician
    Posts: 502
    Joined: 03/09/2017

    I am unsure how you plan to deduct “the full price”

    https://www.section179.org/section_179_vehicle_deductions/

    Based on the GVWR of the current Tesla X, $11,160 is your allowed deduction. Please correct me if I am wrong.

    #171413 Reply
     wp746911 
    Participant
    Status: Physician
    Posts: 21
    Joined: 04/04/2016
    #171447 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 6148
    Joined: 01/09/2016

    A Tesla is not a Range Rover. Section 179 for a luxury vehicle is based upon gross vehicle weight – Tesla’s don’t qualify.

    This is not something I would be comfortable with even if you bought a Range Rover. Just don’t see the ordinary and necessary component.

    What is it about doctors and Teslas?!? 😀

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #171642 Reply
    DMFA DMFA 
    Moderator
    Status: Physician
    Posts: 2016
    Joined: 06/24/2016

    Wife has a well established ‘tax home’ at our house (main job is telerad-1099). She will be driving (for radiology on site coverage- also 1099 ) to other cities ~400 miles/month, might be as high as 1000 miles/month. I have a ‘regular’ W2 day job at a hospital in the city I live (my ‘tax home’). I also have some side 1099 contractor income in surrounding cities which has be drive about 100 miles/month to other cities.

    1) Both our driving (for our 1099 jobs, to other cities) should qualify as a business expense. My main concern is my miles- me driving for my 1099 to other cities (not my regular w2 job commute miles) would be a business expense since my main job is my tax home, right?

    2) Our plan- we buy a tesla X this year (100k) and title it in our names, paid for out of our private bank account. It should arive near the end of this month. We will make sure we drive it only for business this year (will likely only be 100-200 business miles). Then we will use 179 to get the full price (100k) written off. To maintain the business car status we will make sure and keep business usage over 50%. When we sell it, there will likely be some reclaiming to deal with.

    a) My main concern is buying it in our names rather than through a LLC- is that ok? I’ve seen some sites mention that you should buy it through your businesss, but I don’t see any docs from the IRS saying the IRS cares (as long as you can prove your mileage usage). I do have an LLC but haven’t setup my businesses through it yet, and wife isn’t added to it yet.

    b) Would the IRS care that we deducted 100k for a SUV in a year that we owned it for maybe 2 weeks and 200 business miles? Techincally it seems kosher, but…

    c) the 179 would exceed our 1099 income this year- I assume we can carry the extra amount forward into next year?

    d) we could use both our mileage toward the 50% cutoff?

     

    Click to expand…

    1. Travel between work locations counts as business-related miles.  If your home is a bona fide work location, then from work at home to work elsewhere *should* qualify.  Yes, your business usage for the car will be counted by miles.  Remember that her home to her on-site coverage, if her home is not a work site, is just commuting and not subject to mileage, unless she is going to multiple temporary work sites.

    2.  You can’t deduct more than $25,000 a year on an SUV, even if it’s over 6,000 lb GVWR, so…moot point.  But if what you’re talking about is §168(k) bonus depreciation, then you can take 100% for that…if it’s proportional to business use.

    2a. It probably helps to be titled in the name of the business in the event of an audit, but is not explicitly stated in IRS Pub 946.  This is just one way of demonstrating intent for business use.  Again, you don’t really *need* to, because the deductibility is still relative to the mileage used for business versus personal regardless of how it’s titled.

    2b. Again, you can’t deduct more than $25,000 a year on an SUV from §179, but can take 100% first-year bonus depreciation on it.  Even if you could deduct all of it, you can only deduct the proportion of business use, which is somewhere between half and all (since less than half means no deduction).  Technically it doesn’t matter if you got it in January or December 2018, you’d still put it on your 2018 return.

    2c. You could, but I’m not sure it would exceed your income this year, since you can’t get as much as you thought.

    2d. What is the business?  Are you and your wife the same qualified joint venture?  Or do you have separate businesses?

    *If* you still decide to do this, and take your $25K or more deduction, then you will need to use airtight accounting for your business (recommend separate accounts, again not *needed* but useful in this event) and record-keeping with the mileage.  If you want to play these games, then you run the risk of audit, esp if you’re buying a Tesla to deduct an amount greater than your business earnings…which, if your accounting is up to snuff, you’ll be fine.

    "I like money." - Frito Pendejo (Idiocracy)

    [Not a financial professional (yet), lawyer, or employee of The White Coat Investor]

    #171649 Reply
    DMFA DMFA 
    Moderator
    Status: Physician
    Posts: 2016
    Joined: 06/24/2016

    A Tesla is not a Range Rover. Section 179 for a luxury vehicle is based upon gross vehicle weight – Tesla’s don’t qualify.

    Click to expand…

    Model X’s GVWR is 6,581 lb.  Still limited to $25K from §179 but can take 100% bonus depreciation as far as I can tell.

    "I like money." - Frito Pendejo (Idiocracy)

    [Not a financial professional (yet), lawyer, or employee of The White Coat Investor]

    #171650 Reply
    Liked by jfoxcpacfp

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