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Business Tax Benefit

Discussion in 'Model S' started by fluxemag, Apr 5, 2013.

  1. fluxemag

    fluxemag Member

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    Can someone explain to me what the Business Tax Benefit means in the cost of ownership calculator? I always see nice cars with commercial plates and I just wanted to see how I can get in on that. My wife has her own business, albeit a break even endeavor. I also generate some consulting income in addition to my salary job and being classified as a "pattern day trader" by the IRS. I have always done my own taxes because of the day trading complexity, but this was the first year I had to cover a business as well. I just feel like I'm missing something in regards to deducting vehicle use. Maybe it's time to have a pro do my taxes!
     
  2. Zextraterrestrial

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    Me too. My wife has a private jewelry business and I got personal 'joulere' plates and will use the car for business some & I have used my car for official work some too
     
  3. bhuwan

    bhuwan Active Member

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    In my humble opinion: talk to a professional or look at the IRS docs - I've received some awful tax advice from folks ( I always look to substantiate it against the official IRS docs) that could have led to severe consequences had I been audited.
     
  4. johnnyS

    johnnyS Member

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    We are allowed to expense through the business automotive expenses based upon the percentage of business use of the vehicle. I am able to show that about 70% of my mileage is business related. Our accountant calculated a large depreciation number for our model S in 2012.
     
  5. JakeP

    JakeP S P4996 / X P6028

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    Just out of curiosity, was your depreciation number than $11,360? That is supposed to be the Section 179 luxury auto depreciation limit, which I believe still applies to Model S even though it is an EV, which receive special treatment elsewhere.
     
  6. Jkam

    Jkam Member

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    I believe if you claim that your Tesla is a business car you are only allowed to take a $2,500 tax credit instead of the $7,500. I would definitely consult a professional.
     
  7. ITSELE

    ITSELE Member

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    I'm sorry, but I opened this thread with hopes of obtaining some good information, not "consult a professional". We are all professional and just want facts from possibly some accountant Tesla owner who is willing to share. Ya, ya, ya, I know...everyone's situation is different and we can't know it all but a little basic help where would be nice...

    Just to repost some good information I copied in a previous thread that was looking at leasing vs depreciating by JakeP

    http://www.teslamotorsclub.com/showthread.php/15437-Today-s-lease-announcement-was-anticlimactic/page2

    "This is definitely my conjecture about what people will or won't do, but as a small business owner myself I have both leased and purchased/depreciated vehicles. Most people choose to lease, because they get a new car every 2-3 years, and because expensing the lease cost is dramatically simpler than depreciating. For example, take the Model S situation. If this was a true 3-year lease and the payment was 1200/mo, you would be able to deduct 1200*12 = 14,400 in lease costs for each of the three years, plus operating costs, which could include your HPWC and electric bills, plus any service plan required by Tesla. Instead you purchase the car, and must depreciate it. Immediately you encounter the Section 179 depreciation expense limits on passenger vehicles, which limits you to 11,160 in the first year, and then 5,100 for the second year, then 3,050 for the third year, a sum of 19,310 which is considerably less than 14,400*3 = 43,200. Then after three years you are subject to a gain/loss calculation, which determines the sale price less the net book value. Let's say you paid 100K and then sold after three years for 43K, using Tesla's example. Gain Loss is then 43K - (100K - 19,310) = a loss of -37,690. So what you lost on deprn expense, you make up as a loss at time of sale, if it sells for that low of a price after three years...but that all depends on the sale price. And the loss can only offset your other income and gains, I believe.


    So you might financially be better off buying and depreciating for tax purposes, but I don't think that most people want to deal with depreciating and then gain/loss if they can help it just because of the complexity of carrying this asset across tax years, which is why most people lease luxury vehicles for business. When buying a vehicle, they typically but an SUV, which isn't subject to the Section 179 limitations because it has a GVWR of over 6,000 pounds. This so-called SUV loophole actually lets you take 100% of the vehicle cost as depreciation in the year it is placed in service, under the various bonus depreciation allowances currently available from stimulus legislation since 2008. If my Tesla had been 300 pounds heavier, I think I might have been eligible for this!"
     
  8. yobigd20

    yobigd20 Well-Known Member

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    One thing I would note about 'business tax benefit' , -> consult professional LOL. Especially when it comes to registering the car. I believe (correct me if I'm wrong), if you first register the car under the business, *YOU* personally cannot claim the $7500 tax credit on your return. I *think* the business can claim the credit though; but remember: the business would need to have more than $7500 in tax liability to get it all back! (I think Chevy dealers got in trouble for doing this, they were first registering the Volts themselves and then selling them off their lots which prevented buyers from claiming the credit as only entity that the car is first registered under can claim it - another reason to hate Chevy->corrupt dealers!)

    But like I pointed out, a real tax pro would know what to do. As far as registering it under yourself and then claiming depreciation business tax benefit, etc, I'm clueless.
     
  9. bhuwan

    bhuwan Active Member

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    I hate dealerships in general.!
     
  10. Ven Rala

    Ven Rala Member

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    I think leasing is generally better from a business tax standpoint (my accountant keeps telling me to lease any future car purchases), so I am trying to lease the Model S through an independent leasing company. However I've heard back from 2 that they will not pass on the $7500 tax credit, stating that they cannot take advantage of it. It is clearly written in the IRS form 8936 that leasing companies can take the $7500 tax credit. I feel like this is a scam, where they will take the tax credit but not forward it to the leasee. They should be able to just take it off the purchase price as Chevy and Nissan do when they lease EVs. Has anyone used an independent leasing company and received the $7500 tax credit?
     
  11. KenEE

    KenEE P1937 Reward Excellence!

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    My Volt lease definitely has the $7500 tax credit baked in. They took the credit and passed it on to me in the form of lower payments. (one of the reasons I went with the lease - so I wouldn't have to worry about how to get the credit )
     

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