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Showing Tesla as a business expense

Discussion in 'Model S: Ordering, Production, Delivery' started by talhas3, Jul 8, 2014.

  1. talhas3

    talhas3 Member

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    How many of you are showing the Tesla as a business expense? If so, my question is did you buy it under your business name or your own name?
     
  2. Elctrek

    Elctrek Darth Voltage

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    I bought/Leased mine with the Tesla Business Lease. It is leased by my company in the company name.
     
  3. Ray Skillman

    Ray Skillman Member

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    Putting mine in the Business name also. Hated seeing $7500 of free fed money go to waste but wasn't brave enough to try purchasing and leasing back to my company in fear of the flags that would raise.
     
  4. talhas3

    talhas3 Member

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    So when leasing it in company name, what do they look at to do the lease?

    What did your monthly payments come out to? Do you have a limit on yearly miles you can drive? Also, at the end of the lease, you can purchase the car?
     
  5. Elctrek

    Elctrek Darth Voltage

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    In California in the county where I live you can still get around $5,000 in refunds from the air quality control district and the State.

    My CPA said it was a better option for me to do a business lease with 15,000 miles per year for 3 years than to purchase. He said we could write off almost 100% on the lease but not the purchase.

    I think there was an option to purchase at the end as well... but in my opinion the technology will improve in 3 years so I will get a newer version in 3 years if they are still around and we like the car after 3 years.

    My lease is around $2,100 per month if I remember correctly.
     
  6. invisik

    invisik Member

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    We bought and it's registered to the business and me personally.

    -m
     
  7. Lloyd

    Lloyd Active Member

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    Yes, but the purchase costs you 50% less! If you buy the car, keep a log of the miles for business, and you can deduct that percentage. Less paperwork with the lease.
     
  8. invisik

    invisik Member

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    Less paperwork is correct. Our Delivery Specialist had never done a business purchase before and took about 3 extra hours to get everything correct at our delivery. I would tell the manager at your delivery Service Center that it's a business transaction and to make sure they have all the paperwork together to sign and with proper names on it.

    We really wanted to lease but it didn't exist when we bought. The business leasing started about 2 weeks after ours was delivered... :/

    -m
     
  9. Clprenz

    Clprenz Member

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    #9 Clprenz, Jul 9, 2014
    Last edited: Jul 9, 2014
    Really looking for more insight right now. Thanks for what you guys have posted. My father has owned his own business for over 20 years. I am trying to figure out how to make the Model S the most attractive to own. He is not attracted to expensive cars and prefers to have a good deal.
    I have looked into things like; Accelerated deprecation, Standard mileage deduction, and Itemized deduction.

    Right now I have the Tesla coming to $264*, at Accelerated depreciation (I'll attach the Spreadsheet)

    While that sounds great and everything: Part 2

    My dad loves to follow Dave Ramsey's financial advice, he doesn't want to borrow a dime. Cash isn't an option right now as: I have two sisters in out of state college, and I'm in the pipe. Any convincing points to make that would bridge the gap would help.

    Any thoughts are welcomed!
    - Christian

    Business Lease vs. Finance 3 YEAR - Google Sheets
    *Subject to change as conditions of Mileage, business use, and tax rate change
     
  10. talhas3

    talhas3 Member

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    The credit union that I have spoken to for financing it under my own name say they dont do business financing. So I guess to do the business lease, I would have to go through Tesla financing for the business lease. Has anyone done it any other way?
     
  11. AMDCPA

    AMDCPA New Member

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    Christian,

    If cash is tight, assuming you can qualify for a lease, monthly lease payments generally will be less than monthly loan payments (depending on the downpayment). Your spreadsheet assumes the depreciation will be deducted in the first 3 years of ownership. That is incorrect. The cost of the Tesla puts it in the "Luxury" car category under Internal Revenue Code Section 280F. The depreciation on Luxury autos is limited to $3,160 for the 1st year (assuming 2014), $5,100 for year 2, and $ 3,050 for year 3. Total allowable depreciation for the first 3 years of ownership will be $11,310 x 70% = $7,917. Depreciation is limited to $1,875 x 70% for years beginning with year 4 of ownership.

    When you adjust your spreadsheet for the maximum allowable depreciation, there is a significant tax savings leasing vs. buying. Additionally, your spreadsheet should include the inclusion amount for leased luxury cars based on the Tesla's value when placed in service. Based on the value on the spreadsheet, the amounts are $67 x 70% , 146 x 70%, and 217 x 70% for years 1 through 3, respectively.

    - - - Updated - - -

    Christian,

    If cash is tight, assuming you can qualify for a lease, monthly lease payments generally will be less than monthly loan payments (depending on the downpayment). Your spreadsheet assumes the depreciation will be deducted in the first 3 years of ownership. That is incorrect. The cost of the Tesla puts it in the "Luxury" car category under Internal Revenue Code Section 280F. The depreciation on Luxury autos is limited to $3,160 for the 1st year (assuming 2014), $5,100 for year 2, and $ 3,050 for year 3. Total allowable depreciation for the first 3 years of ownership will be $11,310 x 70% = $7,917. Depreciation is limited to $1,875 x 70% for years beginning with year 4 of ownership.

    When you adjust your spreadsheet for the maximum allowable depreciation, there is a significant tax savings leasing vs. buying. Additionally, your spreadsheet should include the inclusion amount for leased luxury cars based on the Tesla's value when placed in service. Based on the value on the spreadsheet, the amounts are $67 x 70% , 146 x 70%, and 217 x 70% for years 1 through 3, respectively.

    - - - Updated - - -

    Christian,

    If cash is tight, assuming you can qualify for a lease, monthly lease payments generally will be less than monthly loan payments (depending on the downpayment). Your spreadsheet assumes the depreciation will be deducted in the first 3 years of ownership. That is incorrect. The cost of the Tesla puts it in the "Luxury" car category under Internal Revenue Code Section 280F. The depreciation on Luxury autos is limited to $3,160 for the 1st year (assuming 2014), $5,100 for year 2, and $ 3,050 for year 3. Total allowable depreciation for the first 3 years of ownership will be $11,310 x 70% = $7,917. Depreciation is limited to $1,875 x 70% for years beginning with year 4 of ownership.

    When you adjust your spreadsheet for the maximum allowable depreciation, there is a significant tax savings leasing vs. buying. Additionally, your spreadsheet should include the inclusion amount for leased luxury cars based on the Tesla's value when placed in service. Based on the value on the spreadsheet, the amounts are $67 x 70% , 146 x 70%, and 217 x 70% for years 1 through 3, respectively.

    - - - Updated - - -

    Elctrek - assuming you use your Tesla exclusively for business, your CPA is correct. As long as the business use is great than 50% and you plan to keep the Tesla for 3 years, the auto related deduction is usually greater with a lease vs. a purchase.
     
  12. talhas3

    talhas3 Member

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    After talking with my CPA, I will be looking to do the business lease also. Now have to figure out if the Tesla business lease model is the best option to go with.
     
  13. mellington

    mellington Member

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    Reporting from the UK - Business as we have tax breaks that allow 100% corporation tax write down in the UK (20% of car value), £5k grant and avoid taking money out of the company (20% dividend tax) plus all of the expenses there on an in the company. There are a few other benefits like no road tax, no benefit in kind (BIK) tax this year (comes in over the next few years), and the low fuel bills.

    Personally this means that I lose my personal car and it's finance and running costs (Land Rover Discovery 4 which would have a very high BIK and has high road tax) and rather than give the government the cash it goes to pay for the car. This works to the extend that I am personally better off as a result of buying from day one in terms of cash flow, the extended finance period is the tail but the NPV still puts me way ahead in 5 years time.
     
  14. Elctrek

    Elctrek Darth Voltage

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    I look at this purchase/lease like a large computer... I see technology changing over the years... hardware, battery etc... I don't want to own old technology.
     
  15. mellington

    mellington Member

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    But the leasing companies do? They just charge you for profit and risk.

    The opex v capex models have their own strengths but I always think that for something than isn't shared / is required capex wins. Opex is best for shared.
     
  16. AmpedRealtor

    AmpedRealtor Active Member

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    Buy it in your personal name and claim the $7,500 tax credit. The following tax year, you sell the car on paper to your business which can then claim it as a business deduction. Best of both worlds, no?
     
  17. island

    island Fairfield County / NYC

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    #17 island, Nov 27, 2014
    Last edited by a moderator: Nov 27, 2014
    Tesla Business Leasing is a joke. I've leased (and purchased) many M3s and other high end vehicles under my business or myself over the past 16 years without a late payment. Dealing with a clueless finance guy (initials **) at Tesla for 2 weeks produced terms of 30% down to get a P85D. The reasoning he said was because Tesla "Business" Leasing does not run business credit, only personal, and he suggested I find a co-signer or get a cheaper Tesla. He even emailed me a link to better understand how credit scores work!

    Now with my credit over 815 this was hilarious. Spoke with someone else that had a clue and got approved for 100% covered - minus my $2,500 down.

    Tread carefully with any place without much loaning experience.
     
  18. David_Cary

    David_Cary Member

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    So the concern with purchasing the car personally and leasing it back to the company is raising flags? My partners have done this in the past and I was thinking of doing it.

    How does a downpayment work on a business lease? I am in the situation where I have full control now and in a few months, I will be in a larger company that I think works this with a "car allowance" which I'm guessing won't be more than $1k a month. So I could lease with a $25k downpayment and then transfer the lease.

    Probably time to check with the CPA.
     
  19. MsElectric

    MsElectric Active Member

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    But then your business will have to pay sales tax and registration fees wiping away that $7,500...
     
  20. sandpiper

    sandpiper Active Member

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    Interesting. Who did you speak to? I had the same experience and was a little offended. Suffice it to say, I'm not a credit risk. Although in my case, I simply don't borrow money, so I have little credit history to go by.
     

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