Need some advice as well. I work from home for a corporation (IT engineer), and my wife has a small home business (setup as an LLC with S-corp filing). Wife's home business has smaller revenue (< 40k/yr, and overall growing it but claiming net loss due to growth). Current business use of the vehicle would be 25-30% What would be the best way to take advantage of the tax scenario and payment for the X? Would need to finance the X with about 20% down and rest on loan.
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Model X IRS 100% Deduction “Hummer Loophole” - 2018 Edition
- Thread starter MelaniainLA
- Start date
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- Tags
- Model X section 179 tax break
cpa
Active Member
Can you pull this off if you do not have an LLC? My wife and I have a rental property that brings in 41k but include it on our personal taxes. If we buy a 90k Model X, does the 179 25k and bonus deduction come off our gross income (that includes the rental) or just the rental income (I assume the latter). Plan is to buy end of Dec., use 100% for business and then keep above 50% going forward. I assume I need to talk to an accountant, but curious if the answer is obviously "NO"
I’m creating a new thread on this issue since the old thread was about 2017 rules and got confusing. Since there’s been some confusion around this and I just typed the following up for someone else in a PM, thought I’d clarify the new rules under the Trump Tax Law that would enable up to 100% immediate tax deduction for a Model X — See below and if you want to reach me personally with any questions PM me or my email is hdhemmati at gmail dotcom:
I was totally clueless about this 179 deduction and bonus business depreciation business for heavy SUVs (>6000 pounds GVWR or “Hummer Loophole”). Then my uncle did it and then I discovered some friends did it too. I hired a tax attorney to give me an official opinion (paid her $150 for 30 min time on phone) so that I would have this documented and protect myself in case of issues down the line and prove that I did my diligence on it.
Basically, under the new Trump tax plan (Effective late September 2017 and valid through at least 2018), you get to deduct up to 100% of the Model X value off your taxes as a proportion of its BUSINESS use in the year you buy it without needing to depreciate over several years as before. For example, say you buy a Model X in May, and you use it 75% for professional work (consulting, wedding photographer, private doc, whatever you do) and 25% personal, and the car cost $100k including tax, you deduct $75k off your federal taxes (and an appropriate proportion off state based on your state rules - you have to depreciate the state component over 5 years in my state of CA) -- you might report a loss but that way you get $$ back year of the following years. The business to personal ratio has to be DOCUMENTED and believable and must exceed 50% to trigger. You can't say easily 100% unless you did what I did: I bought it 2nd to last week of December. I kept my old car until Jan 2. I drove the X ONLY for business and then left it alone in my garage until Jan 1. That way, I got to say 100% business! $100k car, after tax, ended up costing me $50k. Not bad, eh? You MUST have documentation in the form of a mileage log (handwritten) ideally supported by odometer readings using Tesla Service records. The IRS can (and often does) request the documentation at audit time.
Math was as follows:
Car after tax: $100,000
Section 179 Deduction: $25,000 (heavy vehicles only)
100% bonus depreciation: $100,000-$25,000 = $75,000 (new Trump tax plan effective late September 2017 and beyond; previously it was 50% bonus, which meant $37500, not $75,000)
Total write-off from federal taxes: $25,000 + $75,000 = $100,000 (100% of the car)
The key, therefore, is to keep business use to a maximum level in 2018 so you get the maximal deduction upfront.
I do my own taxes btw... This was relatively easy to do in TurboTax but some accountants aren’t yet up to speed on the Trump tax changes. You can get a loan and pay the loan off over time, but take the tax deduction RIGHT away. So I have a loan from tesla at 1.49% interest and I deduct the interest as well!! But the PRINCIPAL (the cost of the car + tax) got written off immediately!
Moreover, through all/most of 2018 you'll get $7500 off your taxes from federal government for having an EV, ON TOP of the 100% immediate tax deduction, making it even cheaper. That is on top of any state and local incentives you might be eligible for ($2500 from CA state and $500 from LA City for us). And if you order through a referral link from an existing Tesla owner, you get free lifetime supercharging access.
Happy to discuss with anyone here in more depth (PM or email me) -- all this depends on your tax situation etc so might be worthwhile confirming with accountant (if you have one) re your personal situation before taking the plunge. For what it's worth, I'm VERY happy I did! You'll LOVE your car as well. A lot of people on Tesla forums and TMC bent over backwards to help me make purchase decisions (battery, colors, options, etc) and we are all here to help you with your choices as well.
Good luck!
It’s to my understanding after contacting a few CPAs in Los Angeles, that California doesn’t conform to section 179 and the 100% bonus depreciation deduction.
There was only one CPA who said that you can’t file it on the 540 at a state level, but you can file it at a federal level on the 1040.
Is this correct?
Kacey Green
Member
Correct. BUT having a corporation dramatically reduces your chance of audit. Generally because regular individuals will cheat on taxes far more than corporations because corporations presumably have accountants and others watching over and have much more to lose. That said, always be squeaky clean. Don’t cheat. If this doesn’t apply to you and you can’t afford a Tesla, don’t cheat to get one. Not worth it. Really.
Uncle Paul
Well-Known Member
In fringe cases, the Section 179 deduction can become complicated.
If you own a profitable company, the deduction is a no brainer. Makes the Model X the net least expensive Tesla model.
For those with Real Estate, usually the properties will throw off their own deductions, leaving little profit left to write off.
Best to run it through your own tax or investment professional. Could even vary from state to state what you can write off.
IRS is well aware that this is a tempting tax reduction technique, and obviously will have parameters that they will find acceptable, an others that will send up a red flag.
Basically you need to have taxable profits that can be offset by buying a business class vehicle with a GVW over 6,000 lbs with certain physical specifications. The Tesla Model X fits this class. Just need to find out if you legitimately qualify for the deduction.
If you own a profitable company, the deduction is a no brainer. Makes the Model X the net least expensive Tesla model.
For those with Real Estate, usually the properties will throw off their own deductions, leaving little profit left to write off.
Best to run it through your own tax or investment professional. Could even vary from state to state what you can write off.
IRS is well aware that this is a tempting tax reduction technique, and obviously will have parameters that they will find acceptable, an others that will send up a red flag.
Basically you need to have taxable profits that can be offset by buying a business class vehicle with a GVW over 6,000 lbs with certain physical specifications. The Tesla Model X fits this class. Just need to find out if you legitimately qualify for the deduction.
What if you're just starting a new business and you will not have a profit for the first 1-2 years?
Hi! Was trying to PM you but having trouble. Does the car need to be titled under the corporation and if you do a loan must it be under the corporation?
I’m creating a new thread on this issue since the old thread was about 2017 rules and got confusing. Since there’s been some confusion around this and I just typed the following up for someone else in a PM, thought I’d clarify the new rules under the Trump Tax Law that would enable up to 100% immediate tax deduction for a Model X — See below and if you want to reach me personally with any questions PM me or my email is hdhemmati at gmail dotcom:
I was totally clueless about this 179 deduction and bonus business depreciation business for heavy SUVs (>6000 pounds GVWR or “Hummer Loophole”). Then my uncle did it and then I discovered some friends did it too. I hired a tax attorney to give me an official opinion (paid her $150 for 30 min time on phone) so that I would have this documented and protect myself in case of issues down the line and prove that I did my diligence on it.
Basically, under the new Trump tax plan (Effective late September 2017 and valid through at least 2018), you get to deduct up to 100% of the Model X value off your taxes as a proportion of its BUSINESS use in the year you buy it without needing to depreciate over several years as before. For example, say you buy a Model X in May, and you use it 75% for professional work (consulting, wedding photographer, private doc, whatever you do) and 25% personal, and the car cost $100k including tax, you deduct $75k off your federal taxes (and an appropriate proportion off state based on your state rules - you have to depreciate the state component over 5 years in my state of CA) -- you might report a loss but that way you get $$ back year of the following years. The business to personal ratio has to be DOCUMENTED and believable and must exceed 50% to trigger. You can't say easily 100% unless you did what I did: I bought it 2nd to last week of December. I kept my old car until Jan 2. I drove the X ONLY for business and then left it alone in my garage until Jan 1. That way, I got to say 100% business! $100k car, after tax, ended up costing me $50k. Not bad, eh? You MUST have documentation in the form of a mileage log (handwritten) ideally supported by odometer readings using Tesla Service records. The IRS can (and often does) request the documentation at audit time.
Math was as follows:
Car after tax: $100,000
Section 179 Deduction: $25,000 (heavy vehicles only)
100% bonus depreciation: $100,000-$25,000 = $75,000 (new Trump tax plan effective late September 2017 and beyond; previously it was 50% bonus, which meant $37500, not $75,000)
Total write-off from federal taxes: $25,000 + $75,000 = $100,000 (100% of the car)
The key, therefore, is to keep business use to a maximum level in 2018 so you get the maximal deduction upfront.
I do my own taxes btw... This was relatively easy to do in TurboTax but some accountants aren’t yet up to speed on the Trump tax changes. You can get a loan and pay the loan off over time, but take the tax deduction RIGHT away. So I have a loan from tesla at 1.49% interest and I deduct the interest as well!! But the PRINCIPAL (the cost of the car + tax) got written off immediately!
Moreover, through all/most of 2018 you'll get $7500 off your taxes from federal government for having an EV, ON TOP of the 100% immediate tax deduction, making it even cheaper. That is on top of any state and local incentives you might be eligible for ($2500 from CA state and $500 from LA City for us). And if you order through a referral link from an existing Tesla owner, you get free lifetime supercharging access.
Happy to discuss with anyone here in more depth (PM or email me) -- all this depends on your tax situation etc so might be worthwhile confirming with accountant (if you have one) re your personal situation before taking the plunge. For what it's worth, I'm VERY happy I did! You'll LOVE your car as well. A lot of people on Tesla forums and TMC bent over backwards to help me make purchase decisions (battery, colors, options, etc) and we are all here to help you with your choices as well.
Good luck!
In my case, none of the above -- but best to ask accountant because your situation might differ.
trekkie
Member
IF the reimbursement per mile, you can't claim. If it's a flat amount, you can claim. that was pre crazy ass 2018 tax so please double check all that.
Yinn
Active Member
Did you register it under you or the corporation? What about the insurance policy, seperate commercial policy?
I registered under me and got regular non commercial policy since I’m not hauling products or people. Accountant was ok since it’s single member S Corp. but I’m not accountant so ask yours.
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