Does anyone have experience with Section 168 100% bonus depreciation on a Model X used for business. Most CPAs I talk to do not recommend it. My vehicle is registered to my business and is used 80% for business, looks like as per the IRS I should be able to deduct 80% of my vehicle price in the first year of service. your comments are much appreciated.
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Model X section 168 bonus depreciation
- Thread starter Optimistix
- Start date
NoSoup4U!
Member
You are correct. Many CPAs are not familiar with it and find it too good to be true. Either make them review the appropriate sections in the tax code or find a CPA with experience with these things. I had to educate my CPA as well and he reassured himself with 2 of his colleagues. One said yes, the other no. He eventually got on board. Just note that the car will be worth 20% of it's initial value on your books right away. Meaning, whenever you sell the car, you'll have to pay tax on the gain betwen book value and sale value. But, by the speed with which these cars depreciate, you might not have to worry about that...lol!
Thank for the reply. I don't plan to sell the car for many years. But looks like it's legit under the tax code. Specially if you have detailed logs tracking every trip. I have another suv suv I use for personal trips. I spoke with many friends some previously at the IRS and all of them recommend against it. So trying to find people who have had success with it.
I have done it for tax year 2017. I didn't even need to explain it to my CPA. I just asked "if I could use section 168 for my Tesla Model X" and she knows what it was. But ours maybe easier. We had an existing BMW X5 used for business for the same % usage. We just traded it for the Model X.
Interesting thing is that originally we did not qualified for the CA EV rebate. But after the Model X federal tax credit, it pushed us just under the qualified income so we could also claim the CA rebate.
Interesting thing is that originally we did not qualified for the CA EV rebate. But after the Model X federal tax credit, it pushed us just under the qualified income so we could also claim the CA rebate.
testarossa
Member
The reason why may CPAs don't recommend using this line item is because it draws a huge red flag from the IRS. Most people prefer to stay on the safe side and fly under the radar.
Uncle Paul
Well-Known Member
No red flag at all. Standard business deduction to induce businessses to invest in more modern equipment that depreciates more rapidly than the standard deduciton allows.
My accountant acutally reached out to me to show me how replacing my older X with a new one would offset some of my one time income items. Wiped them out cleanly and effectively.
Everybody has a different circumstance, so always check it out before making your purchase. Some strategies can be helpful to optimize your legal deductions.
This is similar to how household vehicles need all sorts of safety and fuel economy standards met, but for larger vehicles like trucks (Model X is considered a SUV Truck due to GVW over 6,000 lbs). need less safety and emissions controls. That is one of the reasons the most popular vehicle sold today in USA is not a fuel efficient family car, but a big, hunkin' Ford F-150 Pickup Truck.
Just gotta follow the rules and only take the deductions if they are valid. Do not lie to IRS. Follow the instructions of your legitimate tax advisor.
The combination for me getting a good price for my old used X, the reductions in pricing for a Raven Model X and some one time income items made it a perfect storm for me.
Net costs for my X's were far less than if I had bought base model 3's.
PS. My profitable business still paid lots of taxes. Also paid for lots of SS and Unemployment fees for self and employees. Just mitigated a bunch of them by driving a tax advantaged X over some other non advantaged vehicle.
My accountant acutally reached out to me to show me how replacing my older X with a new one would offset some of my one time income items. Wiped them out cleanly and effectively.
Everybody has a different circumstance, so always check it out before making your purchase. Some strategies can be helpful to optimize your legal deductions.
This is similar to how household vehicles need all sorts of safety and fuel economy standards met, but for larger vehicles like trucks (Model X is considered a SUV Truck due to GVW over 6,000 lbs). need less safety and emissions controls. That is one of the reasons the most popular vehicle sold today in USA is not a fuel efficient family car, but a big, hunkin' Ford F-150 Pickup Truck.
Just gotta follow the rules and only take the deductions if they are valid. Do not lie to IRS. Follow the instructions of your legitimate tax advisor.
The combination for me getting a good price for my old used X, the reductions in pricing for a Raven Model X and some one time income items made it a perfect storm for me.
Net costs for my X's were far less than if I had bought base model 3's.
PS. My profitable business still paid lots of taxes. Also paid for lots of SS and Unemployment fees for self and employees. Just mitigated a bunch of them by driving a tax advantaged X over some other non advantaged vehicle.
Thanks for your response. Small businesses pay a ton of tax already, I have to pay almost 47% including federal state and Medicare on net income. So any legitimate relief I can get is appreciated.
Uncle Paul
Well-Known Member
I used to take a relatively small salary, then take additional shareholder distributions to reduce my taxable income. Had to stay withing guidelines and be reasonable, but it was a strategy to not pay more taxes than required.
Small profitable businesses have lots of tax advantages compared to working for someone else for a living. Believe this is an inducement for people to start up small businesses and hire lots of employees that keep the economy rolling.
Small profitable businesses have lots of tax advantages compared to working for someone else for a living. Believe this is an inducement for people to start up small businesses and hire lots of employees that keep the economy rolling.
testarossa
Member
If you stay within the rules of the IRS, by all means use all the deductions available. However, often times these deductions DO cause audits, which exposes your business expenses to further scrutiny
It's all about the set IRS algorithms which catch deductions which are out of the normal range for said job description on your return, and yes Section 168 is one of those deductions which can flag your account. Many abuse this deduction, and are asking for a full colonoscopy audit, even if the chances of an audit are low.
Im looking at purchasing a Model X using the 168 form but had a few questions hoping you or someone might could help answer. Does the Model X have to be paid in full or could it be paid with a loan? Could it be used for Turo, Uber or DoorDash as part of the business miles? What if your amount of taxable income is lower than the amount looking to be "depreciated" considering the Model X as a business investment?
