MX Now 100% Tax Deductible for a Business?

[GOPJEW]

I have seen some old threads about the X being 50% deductible - but with the new tax law changes I wanted folks to know that, under the right circumstances (consult with your CPA/Tax Advisor - I am NOT saying this is right for you) the MX total cost may be 100% tax deductible in year 1. In the new law the X qualifies for a 100% deduction - not under section 179 but under the Bonus Depreciation which is now 100% under section 168(k). IRS won't issue new guidelines until March at earliest - but it is already in effect.

Here is a great article from Forbes about the changes in the law with specific mentions about deductibility for SUV's over 6,000 lbs GVW (remember this its GVW and NOT Curb Weight). I work in the government space on behalf of several tax interested parties so I knew this was coming when I ordered my X for December delivery (it is in fact retroactive to September 2017).

For those of you who may be in the right situation (taking delivery late last year and even this year) or thinking about purchasing a new one - I hope you can take advantage of this!

Best.

Tax Geek Tuesday: Changes To Depreciation In The New Tax Law

 

[rohitgarewal]

Yep, lots of information out there but thanks for posting! This fact put us over the edge when we placed an order for a 100D for my wife who will be using it for her business.

One thing to keep in mind (out of several) is that if you take the full 100% deduction of the car, but sell the car before 5 years, then the sale proceeds are counted as revenue, for which you will need to pay income tax on.

Also, you can no longer claim this deduction under a schedule A, it has to be a C or E.

 

[carbonx]

Does this deduction apply for S-Corps this year?

 

[GOPJEW]

Does this deduction apply for S-Corps this year?

Type of corporation is irrelevant.

 

[TriggerBanger]

Yep, lots of information out there but thanks for posting! This fact put us over the edge when we placed an order for a 100D for my wife who will be using it for her business.

One thing to keep in mind (out of several) is that if you take the full 100% deduction of the car, but sell the car before 5 years, then the sale proceeds are counted as revenue, for which you will need to pay income tax on.

Also, you can no longer claim this deduction under a schedule A, it has to be a C or E.

Unless you trade the car in for a vehicle that is equal or more in price.

 

[d21mike]

Curious: Say you buy the car in 2018 and take the 100% deduction. I assume you would have to PROVE that you use the CAR for Business 100% of the time to get the 100% deduction. Right? What happens in 2019 if you decide to no longer use the car for business? Someone mentioned 5 years. Is it like a proration?

 

[GOPJEW]

Curious: Say you buy the car in 2018 and take the 100% deduction. I assume you would have to PROVE that you use the CAR for Business 100% of the time to get the 100% deduction. Right? What happens in 2019 if you decide to no longer use the car for business? Someone mentioned 5 years. Is it like a proration?

Yes - the IRS could always audit you to ensure you are using your vehicle for business purposes - you're supposed to keep a log - I use TeslaFi for that purpose - it works wonderfully - and in order to truly take advantage of the deduction the vehicle is supposed to be titled in the company's name.

If you sell or otherwise stop using it for business purposes you must pay back the deduction with, I believe (but may be wrong) interest.

 

[Rhubarb7]

in order to truly take advantage of the deduction the vehicle is supposed to be titled in the company's name.

Supposing you are a sole-owner LLC, which means you have the same ID# as your SS# for tax purposes (i.e. file a single return for both the owner and business entity) - is it still necessary that the car be in the "business" name, seeing as the business isn't really a distinct entity? Myself, I'm an LLC, not an S Corp or any other Corp for that matter.

I am wondering what are the implications for me if I had to use my "business" name - for example, does it hamper my ability to get a Tesla loan, or any loan, because my business only exists for 2-3 years and has no credit history!? And also, wondering what it would mean for insurance purposes!?

 

[GOPJEW]

Supposing you are a sole-owner LLC, which means you have the same ID# as your SS# for tax purposes (i.e. file a single return for both the owner and business entity) - is it still necessary that the car be in the "business" name, seeing as the business isn't really a distinct entity? Myself, I'm an LLC, not an S Corp or any other Corp for that matter.

I am wondering what are the implications for me if I had to use my "business" name - for example, does it hamper my ability to get a Tesla loan, or any loan, because my business only exists for 2-3 years and has no credit history!? And also, wondering what it would mean for insurance purposes!?

I’d ask your CPA. Maybe @cpa can help?

 

[Chewy3]

Any new updates on this?

 

[GOPJEW]

Any new updates on this?

IRS still has not issued the guidelines, but the law is pretty clear - any good CPA should be able to tell you your situation without the need for the guidance since an X already fits the existing rules and that part has not changed.

 

[5States]

Can someone provide a summary of steps to properly execute this? Something like:

1. Purchase/finance MX personally
2. Lease MX to Business
3. Use/track >50% usage for business.

Or for the 100% deduction does it have to be:

1. Business purchases/finances Model X (how is this done? With Tesla Financing or 3rd party?)
2. Place MX title in Business name
3. Use/track >50% usage for business.

Or if no business financing exists:

1. Business pays for ENTIRE purchase of MX
2. Place MX title in Business name
3. Use/track >50% usage for business.

Thanks in advance!

 

[onlinespending]

Does the tax deduction only apply against income made by the business? In other words, if I decided to start my own limo company and only collect $1000 for the entire year in revenue, would I still be able deduct the full value of the car (assuming I have another source of income)?

 

[GOPJEW]

Can someone provide a summary of steps to properly execute this? Something like:

1. Purchase/finance MX personally
2. Lease MX to Business
3. Use/track >50% usage for business.

Or for the 100% deduction does it have to be:

1. Business purchases/finances Model X (how is this done? With Tesla Financing or 3rd party?)
2. Place MX title in Business name
3. Use/track >50% usage for business.

Or if no business financing exists:

1. Business pays for ENTIRE purchase of MX
2. Place MX title in Business name
3. Use/track >50% usage for business.

Thanks in advance!

It is a business deduction...the vehicle SHOULD be registered in the business name (it can be in both the business and your name). You must track business usage for you to be able to survive an potential audit.

Tesla will finance it in both your name and the business name.

Please check with your CPA to understand your specific circumstances.

 

[jtdiddy]

yes, the 100% depreciation is true and legit. also dont forget, the model x also qualifies for the sect 179 deduction, which is what pushed me over the top to get the X over a longe range model 3.

we cleared things through our cpa, who says that to be on the safe side, the model x should be purchased by the business and has to be used more than 50% for business and confirmed that to avoid paying any recapture penalties, needs to be kept for 5yrs.

the trick to avoid having to pay for expensive commercial insurance coverage is to add your personal name in addition to the business name on the registration/title, and then you can qualify for the regular personal insurance rate.

 

[Rhubarb7]

Does the tax deduction only apply against income made by the business? In other words, if I decided to start my own limo company and only collect $1000 for the entire year in revenue, would I still be able deduct the full value of the car (assuming I have another source of income)?

The general answer to that is No. Its a Schedule C deduction, not a Schedule A deduction.

 

[sergey021]

The SUV and Truck Deduction in 2018 – An Unexpected Loophole

 

[dmvevguy]

Hello all, I stumbled across and am kicking myself for not getting an X! I got a Model S in Dec 16' and believe I could have taken the extra 25k off of that, but too bad no one at Tesla dealership told me...otherwise I would have def done it!

So, long story short, I'd like to get your advice on my situation. My car is valued around 70k and I use it primarily for my business (100%) from KBB, and I have a loan remaining balance of 60k.

I actually realized earlier this year I need the Model X for potential towing ability, so the Model X makes sense. Thinking of doing a possible trade in from Tesla on this, and I also got EAP / FSD / Premium Package / nice white exterior and grey interior.

I doubt Tesla will give me 70k and match KBB, but if they do, I'm trying to figure out financially is all this worth it?

Is this tax law good for a few years? I pay a lot of business taxes so this 100% deductible depreciation expense is totally worth it for me...

Thoughts?

 

[Anzir]

My recommendation is to consult your CPA and follow his/her advice. Mine said all the IRS cares about is the mileage log, so I'm registering the car personally for insurance purposes. My attorney is also creating a corporate resolution that states the company is going to reimburse me for all costs related to the car in exchange for the use of the car. That way we can put the car on the practice books but it would still be in my name.

This thread has good info from @cpa

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

 

[kevinarea]

Case 1: In my case if I did the "tax strategy" and bought a $100k Model X, then my business income would be reduced from $200k to $100k. Using the 199A deduction I could reduce my gross income 20%, so the $100k essentially becomes $80k on my personal tax return which is at 24% tax bracket. This results in about $19k of taxes on the business income.
Case 2: If I didn't buy the Model X, the 199A deduction would essentially reduce my business income from $200k to $160k on my personal tax return. Assuming I was still in the 24% bracket, then I would be paying $38k in taxes on my business income. This is a $19k difference compared to Case 1. Not bad.
Case 3: BUT there is also a chance that I could be in the 32% bracket if my household income is high enough. This results in paying $51k in taxes on the business income, so my savings would be $32k. Much better!
My situation shows why your results may vary depending on how close you are to different tax brackets.
My opinion ... if you are near the 32%/24% tax bracket border, then you may want to only deduct just enough to drop you out of the 32% bracket and save the rest for the following years. The other tax bracket borders are not as steep as the 8% drop from 32 to 24.