Model X IRS 100% Deduction “Hummer Loophole” - 2018 Edition

[Hoopoe]

Is the full 179 deduction still active for 2019? I have been hearing guidance from some peers whose accountants have suggested a max of 25k plus regular depreciation for this year. Looking to make a purchase between X and 3 in the next few weeks and this could make a big difference.

Limits for SUVs or Crossover Vehicles with GVW above 6,000lbs
Certain vehicles (with a gross vehicle weight rating above 6,000 lbs. but no more than 14,000 lbs.) qualify for deducting up to $25,000 if the vehicle is purchased and placed in service prior to December 31 and meets other conditions.

Section 179 Deduction for Trucks / Vehicles | Section179.Org

 

[mongo]

Is the full 179 deduction still active for 2019? I have been hearing guidance from some peers whose accountants have suggested a max of 25k plus regular depreciation for this year. Looking to make a purchase between X and 3 in the next few weeks and this could make a big difference.

Limits for SUVs or Crossover Vehicles with GVW above 6,000lbs
Certain vehicles (with a gross vehicle weight rating above 6,000 lbs. but no more than 14,000 lbs.) qualify for deducting up to $25,000 if the vehicle is purchased and placed in service prior to December 31 and meets other conditions.

Section 179 Deduction for Trucks / Vehicles | Section179.Org

The 100% bonus depreciation is active till end of 2022 (or laws change). It is seperate from the Sec 179 deduction.

https://www.pkm.com/compliance/are-you-planning-to-purchase-a-vehicle-in-2019/

 

[Simon21]

Let's say you put the car under your business, and the 179 deduction credit is higher than your company's income. Can you carry over the difference /loss to your personal income and deduct it there?

 

[MD JD]

Let's say you put the car under your business, and the 179 deduction credit is higher than your company's income. Can you carry over the difference /loss to your personal income and deduct it there?

That's also my question. I have both Schedule-C and 1020s income. I drive the car for both.

 

[Uncle Paul]

Section 179 usually applies to an offset towards the owners tax liability. Allows a write off of the Company pass through income taken by the owner.

The % of business miles that the owner drives his car is the % that can be written off. If you use your X 100% for business, you can deduct 100% of the purchase price, as well as the running expenses of the car, including parking, and other valid expenses.
If you only use it 60% for business, but 40% for personal, you can only write off 60% of the purchase price.

Same thing with a business cell phone. You can write off the proportion of your phone and useage costs that you use for business purpose. Personal use has no deduction.

Only works if you have a profitable company.

 

[Simon21]

Section 179 usually applies to an offset towards the owners tax liability. Allows a write off of the Company pass through income taken by the owner.


Same thing with a business cell phone. You can write off the proportion of your phone and useage costs that you use for business purpose. Personal use has no deduction.

Only works if you have a profitable company.

That's true for a C Corp. But what about pass through entities such as S Corp or LLC? Seems like there's nothing preventing taking a loss from one company and offsetting the owner's tax liability from a different income, especially when a company first starts out, as long as there's a profit 3 out of 5 years

 

[docVA]

Hi there
I have a question about buying tesla for business use

This is my situation : I have W2 job and i make 250k plus year . My wife own LLC and she makes 8-10k per year . I have two rental property via two different LLC . One is currently not rented (just bought) and other one i should make about 15k /year . Her work is seasonal and she sells mainly in fairs and shows. We are planning to buy Tesla X . Wanted to know if we can use the 179 benefit and use 25k first year and following year we can just use miles and other expanses . We are in December so we can easily show 100 % use for business .
Any advice would be appreciated

 

[docVA]

Hi there
I have a question about buying tesla for business use

This is my situation : I have W2 job and i make 250k plus year . My wife own LLC and she makes 8-10k per year . I have two rental property via two different LLC . One is currently not rented (just bought) and other one i should make about 15k /year . Her work is seasonal and she sells mainly in fairs and shows. We are planning to buy Tesla X . Wanted to know if we can use the 179 benefit and use 25k first year and following year we can just use miles and other expanses . We are in December so we can easily show 100 % use for business .
Any advice would be appreciated

 

[MD JD]

Hi there
I have a question about buying tesla for business use

This is my situation : I have W2 job and i make 250k plus year . My wife own LLC and she makes 8-10k per year . I have two rental property via two different LLC . One is currently not rented (just bought) and other one i should make about 15k /year . Her work is seasonal and she sells mainly in fairs and shows. We are planning to buy Tesla X . Wanted to know if we can use the 179 benefit and use 25k first year and following year we can just use miles and other expanses . We are in December so we can easily show 100 % use for business .
Any advice would be appreciated

This is what my EA told me:

1) you need to write off this car from one single tax form and you can't split it among different sources of income. I have an S-corp and I also have Schedule-C so either S-corp or Schedule-C, can't be both or split it by % of use btw the two sources of income. Also, I need to make sure this >50% business use for that particular source of income.

2) there will be a forever depreciation recapture on this car, all the way to the end of the universe. The "5 year rule" doesn't work here. I typically drive 27K miles a year and I need the HOV sticker which means I will get rid of this car probably after 3 years. The residual value of a MX 100D is about $60K after such miles/year.

 

[Simon21]

Tax, title and registration etc can easily be $10,000 in certain wonderful states. Can we deduct that as well?

 

[cpa]

Here. Read all about it.

https://www.irs.gov/pub/irs-pdf/p946.pdf

Good luck!

 

[Simon21]

Here. Read all about it.

https://www.irs.gov/pub/irs-pdf/p946.pdf

Good luck!

I just read it all (well, most of the pertinent information) and it doesn't list if the tax/title /registration is included in deduction, but I'm assuming it is deductible because that was your total cost to obtain the property

 

[mongo]

I just read it all (well, most of the pertinent information) and it doesn't list if the tax/title /registration is included in deduction, but I'm assuming it is deductible because that was your total cost to obtain the property

FWIW, this site says the sales tax is part of the total.
Sales Tax Paid for a Vehicle

 

[wbhokie]

Well kudos for reading all of that @Simon21 - Now you know why people think the tax code in general needs a bit of updating. It is just too big. Here is clip from the IRS defining cost basis of an asset. Hope it helps!

Topic No. 703 Basis of Assets | Internal Revenue Service

Basis is generally the amount of your capital investment in property for tax purposes. Use your basis to figure depreciation, amortization, depletion, casualty losses, and any gain or loss on the sale, exchange, or other disposition of the property.

In most situations, the basis of an asset is its cost to you. The cost is the amount you pay for it in cash, debt obligations, and other property or services. Cost includes sales tax and other expenses connected with the purchase. Your basis in some assets isn't determined by the cost to you. If you acquire property other than through a purchase (such as a gift or an inheritance), refer to Publication 551, Basis of Assets for more information.

-----

The wife just picked up a Model X for her LLC today. Scheduled turn in for her previous lease 1st of the year next year. Both are the same color. She just has to make sure to drive the new one for ONLY business this year now and not accidentally take the wrong one for personal use. Delivery went well too. No problems.

 

[MelaniainLA]

Tax, title and registration etc can easily be $10,000 in certain wonderful states. Can we deduct that as well?

Everything. Floor mats. Electricity for the car. Insurance. Paint protection wrap. Window tint. Etc!!

 

[kirkbauer]

This has been great, thank you everybody for the information. I have a question that I don't believe has been answered here. It looks like I'm going to be picking up my new Model X on Dec 29th or Dec 30th. This, for better or worse, wasn't intentional. But it does mean that I'm only going to have 2 or 3 days of use of the vehicle in tax year 2019.

Here is my question: I will be taking delivery in another state and then driving it back home. That drive will obviously making up almost all of my 2019 mileage. Does that count as business use? If so, then I could end up at say 90%+ business use in year one. If that doesn't count, then I could end up at <10% business use in 2019, preventing me from taking any Section 179 or Bonus Deprecation.

Thoughts?

 

[MXWing]

This has been great, thank you everybody for the information. I have a question that I don't believe has been answered here. It looks like I'm going to be picking up my new Model X on Dec 29th or Dec 30th. This, for better or worse, wasn't intentional. But it does mean that I'm only going to have 2 or 3 days of use of the vehicle in tax year 2019.

Here is my question: I will be taking delivery in another state and then driving it back home. That drive will obviously making up almost all of my 2019 mileage. Does that count as business use? If so, then I could end up at say 90%+ business use in year one. If that doesn't count, then I could end up at <10% business use in 2019, preventing me from taking any Section 179 or Bonus Deprecation.

Thoughts?

Transporting it alone without personal detours should be business miles.

Account for every mile.

 

[MD JD]

This has been great, thank you everybody for the information. I have a question that I don't believe has been answered here. It looks like I'm going to be picking up my new Model X on Dec 29th or Dec 30th. This, for better or worse, wasn't intentional. But it does mean that I'm only going to have 2 or 3 days of use of the vehicle in tax year 2019.

Here is my question: I will be taking delivery in another state and then driving it back home. That drive will obviously making up almost all of my 2019 mileage. Does that count as business use? If so, then I could end up at say 90%+ business use in year one. If that doesn't count, then I could end up at <10% business use in 2019, preventing me from taking any Section 179 or Bonus Deprecation.

Thoughts?

Picking up business supplies, and home = office.

 

[msm859]

Picking up business supplies, and home = office.

I avoided the issue. Picked up in Rocklin and drove straight to San Francisco for our office Christmas party

 

[adeel06]

@cpa Could you please clarify what you meant by the fact that you could just take a 100% deduction through standard depreciation rather than using Section 179? I wanted to make sure I don't improperly file. Thank you so much!

Best regards and Merry Christmas!