7500 tax credit

[chloedog]

Bonus depreciation is not limited in California. It is not recognized at all. All types of businesses have a total $25,000 tax deductible so that's not even the end capital reduction. So taxes saved is much less than that. Truly frustrating.

Looks like you are right about the 25k. *thumbs up emoji*

First image was typical business and second is on passenger vehicles.

Ouch. CA...

 

[gmtom1]

If you use the vehicle for business purposes, the maximum tax credit you can claim is $2500. See part 2 of form 8936 here and the instructions here (warning - PDFs). The credit is calculated after reduction for section 179. Also, any excess credit for personal purposes (filed on a form 1040) cannot be carried back or forward - it is lost.

This is only for federal purposes. As was noted earlier, every state has different rules for tax credits, and what parts of federal depreciation rules they allow/don't allow. I'm not familiar with CA, but it wouldn't surprise me that they don't allow bonus depreciation. Not many states do.

 

[Diavel]

If you use the vehicle for business purposes, the maximum tax credit you can claim is $2500. See part 2 of form 8936 here and the instructions here (warning - PDFs). The credit is calculated after reduction for section 179. Also, any excess credit for personal purposes (filed on a form 1040) cannot be carried back or forward - it is lost.

This is only for federal purposes. As was noted earlier, every state has different rules for tax credits, and what parts of federal depreciation rules they allow/don't allow. I'm not familiar with CA, but it wouldn't surprise me that they don't allow bonus depreciation. Not many states do.

So what you are saying is If vehicle is used for business then tax credit is $2500. Additional credit may be taken (up to $5000 to make a total of $7500) if vehicle is used partially for personal but can't be realized for the previous or successive year. Yes?

Taken from pdf:
"The credit attributable to depreciable property (vehicles used for business or investment purposes) is treated as a general business credit. Any credit not attributable to depreciable property is treated as a personal credit.

So $7500 can still be taken between business and personal if vehicle is used for both?

It doesn't explicitly say on the form if the amount treated as personal credit is for the rest of the $7500 fed tax credit.

 

[kort677]

Would love some insight. How can you afford a $100k car and not have enough taxable income to take advantage of the $7500 credit? What am I doing wrong? Wrote the IRS a big check this year. Love that it will be $7500 less next year.

with all due respect, I suspect that you haven't much experience with investing.
Sorry, but I am not going enumerate how you can have a huge portfolio that throws off income with very little tax exposure. for that you'll need to hire your own professional.

 

[Diavel]

with all due respect, I suspect that you haven't much experience with investing.
Sorry, but I am not going enumerate how you can have a huge portfolio that throws off income with very little tax exposure. for that you'll need to hire your own professional.

So you're the chef that knows how to make a fabulous tasty meal but won't do it.

Mattx - a couple of examples we can use (from what Kort677 is referring to) are municipal bonds or MUNI. Depending on bond, it is state tax free and I think all of them are federally tax free. So you can generate income with little tax liability. Another example is income generating stocks on 401's and IRAs. There are more investment vehicles to take advantage of course.

I'm not a professional and am not dispensing advice. Just sharing my own opinion and experiences. My wife also worked in wealth management.

 

[kort677]

So you're the chef that knows how to make a fabulous tasty meal but won't do it.

thank you for you for that snarky response, you are free to chat away. I told him that there are people out there who can assist him with tactics that he is not well versed in. I tend to not post about my financials on public forums

 

[gmtom1]

So what you are saying is If vehicle is used for business then tax credit is $2500. Additional credit may be taken (up to $5000 to make a total of $7500) if vehicle is used partially for personal but can't be realized for the previous or successive year. Yes?

Taken from pdf:
"The credit attributable to depreciable property (vehicles used for business or investment purposes) is treated as a general business credit. Any credit not attributable to depreciable property is treated as a personal credit.

So $7500 can still be taken between business and personal if vehicle is used for both?

It doesn't explicitly say on the form if the amount treated as personal credit is for the rest of the $7500 fed tax credit.

It's a bit confusing because the IRS uses the same form for corporate and personal returns to claim the credit. The credit is not carried forward on personal returns. For corporation returns, the credit gets thrown into the "general business credit" bucket and can be carried forward/back as needed.

Generally, yes, the $7500 in total can be taken, but it's allocated in line 5 of the form between business and personal use. The remaining amount is carried forward on page 2 of the form. Also, keep in mind that in order to qualify for Sec 179, the vehicle generally must be used >50% for business purposes. Also, sorry to correct my earlier statement, the $2500 applies to two-wheel vehicles only.

As you can see, specific facts and circumstances need to be considered and can greatly complicate matters.

 

[Diavel]

thank you for you for that snarky response, you are free to chat away. I told him that there are people out there who can assist him with tactics that he is not well versed in. I tend to not post about my financials on public forums

I agree with you 100% and I didn't intend to have a sparky response but a gentle ribbing.

Great responses everyone (especially gmtom1) as this thread is very helpful to everyone interested I am sure.