Have any laws changed this year that wouldn't let me do take the deductions for the 2019 Tax year?
Looking to start an exotic rentals company in Santa Barbara.
Looking to start an exotic rentals company in Santa Barbara.
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Model X IRS 100% Deduction “Hummer Loophole” - 2018 Edition
- Thread starter MelaniainLA
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- Model X section 179 tax break
And electricity too! I got a separate EV Meter so
I know exactly how much power used!
City Racer
Member
Just finished by taxes, and I can confirm the Model X tax deduction (or any SUV over 6000 lbs) is completely legit. You can do this in TurboTax. When you come to the auto expenses screen, simply follow the path of "I want to use actual expenses" rather than "I want to take the standard deduction". Don't bother to take any Section 179 deduction. Instead, use the 100% bonus depreciation allowance. It's the cleanest method.
Caveats:
1) The vehicle must be purchased new. It cannot be leased.
2) If you don't claim to use the vehicle 100% for business, you will only get a percentage of the deduction.
The regular depreciation schedule in TurboTax is 5 years. That means you should plan on keeping the vehicle for that long, or you may need to pay back some money. I'm not sure if you can buy a second Model X and take the deduction on both, although I don't see why not. If the law persists, I think I'll buy one at least every 5 years.
Use this article as reference:
Small Business Tax Strategy: Heavy Vehicle Plus a Home Office - Sol Schwartz
Caveats:
1) The vehicle must be purchased new. It cannot be leased.
2) If you don't claim to use the vehicle 100% for business, you will only get a percentage of the deduction.
The regular depreciation schedule in TurboTax is 5 years. That means you should plan on keeping the vehicle for that long, or you may need to pay back some money. I'm not sure if you can buy a second Model X and take the deduction on both, although I don't see why not. If the law persists, I think I'll buy one at least every 5 years.
Use this article as reference:
Small Business Tax Strategy: Heavy Vehicle Plus a Home Office - Sol Schwartz
My understanding is that any value you get from selling it is taxable (since the basis is zero after 100% depreciation) with no time limit.
Vinc
Member
cpa
Active Member
Yes, for those interested read Code Section 1245.
Yes, this was added as part of the Tax Preparer Job Security Act enacted last year.
cpa
Active Member
First, recapture only applies if you use the asset in your trade or business.
Second, recapture is figured on "depreciation allowed or allowable." You must depreciate your asset using any lawful method. So, you could opt to use old-fashioned MACRS for automobiles to take the lowest possible amount each year before you sell.
When you do sell, then you compare the sales price to the adjusted tax basis of the vehicle. If the sale results in a gain, the gain is ordinary income reported on form 4797 page 2 and is transferred to Schedule 1 and finally to your 1040.
If the sale results in a loss, then that is an ordinary loss under Section 1231, and is reported on form 4797 page 1 which winds up on the same Schedule 1.
You should be aware that Section 1231 losses are carried forward as a memorandum for five years to offset any future possible Section 1231 gains. For example, if you sell business property for a price that is more than you paid for it, the amount of gain that exceeds the purchase price is a Section 1231 gain, and is taxed like a long-term capital gain. Section 1231 splits losses into ordinary losses and gains into capital gains. But those 1231 gains that would be offset by the five-year carryover of 1231 losses will be taxed as ordinary gains. Confusing? Good!
These gains and losses should be considered when calculating the QBI deduction if applicable.
Yes!! Only change is federal tax credit is $3750 now and only July 1 goes down by half.
PM me with questions.
The criteria is GVWR (Gross vehicle weight rating fully loaded, not empty). X is over 6,000 pounds.
Just heard someone with a MX that got audited. The car was registered under the business name, it was driven under the business name for 70% of the time. He took section 179 in full, didn't back personal use out on the business return. To make matters worse, the guy never reported the 30% on his own return. Even though he was capped out, he had to pay an additional 3% or something for medicare tax. Needless to say, he wasn't very happy after that.
Well that guy frankly did things wrong. Follow the rules, use a CPA, be honest, and you’ll be ok. Not worth a couple bucks to do something careless and/or criminal.
cpa
Active Member
Ask him if he got hit with a negligence penalty. Ask him if he is going to amend his state tax return to report the additional income coming out of the audit, because California will find him, I guarantee. Better to amend voluntarily than to wait for the Notice of Proposed Assessment from the FTB which usually takes the most advantageous position for the state. Meanwhile, interest continues to accrue with each passing day.
The "Additional Medicare Tax" only applies to earned income over 250K (MFJ) and 200K (all others). That rate is a puny 0.9%. The Net Investment Income Tax (NIIT) applies the same thresholds. That rate is 2.9% on investment income. However, if a person is self-employed, that income is considered a Section 1411 trade or business and is exempt from this surtax.
Yup, poor guy had to pay a lot of money to make up for his mistake. Bottom line is that if the car is registered to the business, make sure you allocate use properly and pay taxes on personal use as a fringe benefit. If it is personal with 50%+ business use, make sure you track the cost/mileage properly. There is also depreciation recapture and gain on sale/loss that you have to consider. Just because you didn't get audited doesn't mean you did it right.
Once you take Section 179 on a vehicle, does the asset stay on the tax forms in subsequent year?
Once you take Section 179 on a vehicle, does the asset stay on the tax forms in subsequent year?
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