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Time running out for Model X 2017 *massive* business-use tax deduction

Discussion in 'Model X: Ordering, Production, Delivery' started by MelaniainLA, Sep 24, 2017.

  1. MelaniainLA

    MelaniainLA Member

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    Hi everyone,

    As some of you are aware from previous threads here and on Forums and Reddit, because the Model X has a weight (GVWR, which is printed on a sticker on inside of frame on driver's door) of greater than 6000 lbs, it qualifies as a commercial heavy-duty vehicle, not as a passenger car. As a result, IF YOU TAKE DELIVERY (not place order but actually RECEIVE and USE the car) in 2017 (even as late as December 31, 2017), you get to depreciate a massive amount of the car's purchase price.

    There is a great article at: Section 179 Vehicle List: Deductions For Heavy Vehicles

    There are more articles on this at: Tesla Model X GVWR Is 6,768 Pounds - Vehicles Qualifies For $25,000 Business Tax Deduction and The tax loophole that can save you big bucks off a Tesla Model X

    The Model S is under 6000 lbs GVWR, so it doesn't qualify.

    Per the article:

    "
    You can obtain a substantial first-year deduction if your business car isn’t a “passenger vehicle.”

    Example: Sheila pays $100,000 for an SUV [Average price of a Model X] with a gross loaded vehicle weight of 7,000 pounds. Because it weighs more than 6,000 pounds, it is not a “passenger automobile.” Yet, it is subject to the $25,000 limit on the Section 179 deduction for SUVs. Terry uses the SUV 100% of the time for her travel guide business. She may deduct the following amounts for 2014 [holds true for 2017 as well, when the 50% bonus depreciation will cease to exist]:

    Section 179 Deduction $25,000
    50% Bonus Deduction $37,500 (50% of the $75,000 basis)
    Regular Depreciation $7,500 (20% x %37,500 remaining basis)
    Total $70,000

    Terry can depreciate the remaining $30,000 of the $100,000 over the next several years using regular depreciation.


    This seems like a great deal for people who want to buy heavy (and expensive) SUVs. Keep in mind, the deduction is proportional to the amount of time you use the vehicle for business. If Sheila used the SUV 40 percent of the time for personal, she’d only receive a $42,000 deduction for the year.

    To qualify for the Section 179 vehicle deduction and bonus depreciation, you must use it for business more than 50 percent of the time. This is true for the full five-year depreciation period that applies to vehicles. If your use dips below 50 percent during any of that five-year period, you’ll have to repay your deduction and bonus depreciation. That’s why it’s vital to track your business mileage, no matter what method you’re using to take a deduction."


    I called my tax attorney and was told that if I take delivery near the end of 2017 and am careful to use the car SOLELY for business use, as a small business owner, I could legally take 100% business use on my taxes, or reduce that perfecta accordingly if I do use it for personal things here and there.

    So if you're on the fence, this is a great time to order it because you would need a couple months of lead time to receive the car (unless you purchase Inventory car) and of course some time to consult your tax adviser. You'll get yourself (rather, your business) a nice Christmas gift, save on gas and maintenance, and enjoy the thrill of a Tesla.

    Happy to discuss with anyone -- you can PM me here or email me hdhemmati at gmail dot com. And also happy to privately send you a referral code if you need one, and can introduce you to an all-star OA here in Los Angeles area who can help you find the ideal Model X. Happy shopping!
     
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  2. bhzmark

    bhzmark Supporting Member

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    it would be useful if somebody modified something like Teslalog to allow you to record and keep track of miles for business use documentation purposes. because that would be key to something like this surviving on audit
     
  3. RichardD

    RichardD Supporting Member

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    We use concur for that.. works ok..

    Take A Test Drive of Concur Expense - Concur
     
  4. LyftupX

    LyftupX Member

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    #4 LyftupX, Sep 24, 2017
    Last edited: Sep 24, 2017
    Is it legal to say use it 100% for the first year to take advantage 179 and 50% bonus only having say 1 month remaining in year 1 , then drop it down to 60-70% for the remaining time. I discussed the sec 179 scenario with my cap friend but didn't ask that exactly.
    I think you just stated that scenario is fine, I wonder if there's a catch.
     
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  5. eternal

    eternal Member

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    The best thing to do is pick up the car on December 31st and then you can claim 100%. For the rest of the years as long as you stay above 50% you won’t have to pay recapture on the vehicle. The first year deduction however would be huge if taken for 100%.
     
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  6. Mrwatchdawg

    Mrwatchdawg Member

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    Just out of curiosity would the vehicle have to be registered under the business name?
     
  7. SoCal Jimmy

    SoCal Jimmy Member

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    No it doesn't. We did this with one of ours and its in my wifes name.
     
  8. MelaniainLA

    MelaniainLA Member

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    My tax lawyer said it's OK as long as I can substantiate.
     
  9. mongo

    mongo Member

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    Caveat: The deduction/ depreciation lowers the basis on the vehicle. If/ when you sell it, any proceeds above the basis are taxable income. So selling in the first few years will not net you the sales price.

    Also, if you are depreciating the vehicle you don't get to claim the standard mileage rate (otherwise wow!)

    That said, the first year an X practically pays for itself...
     
  10. EdisonR

    EdisonR Member

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    But if you're audited, can the IRS accuse you of abusing the system?
     
  11. MelaniainLA

    MelaniainLA Member

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    Only if you abuse it. Hence why it's a "loophole" as people call it. It was intended to spur large capital investment by small businesses. If you keep appropriate records in a paper or electronic log you're ok.
     
  12. MelaniainLA

    MelaniainLA Member

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    BTW this doesn't include the $7500 federal and other state incentives on TOP of this!!
     
  13. eternal

    eternal Member

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    My understanding is if you claim 100% business deduction you lose ability to claim the federal rebate. If 50% business then you can claim 3750. Others can chime in if that’s wrong.
     
  14. MelaniainLA

    MelaniainLA Member

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    Never heard this. Any references?
     
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  15. doctheseus

    doctheseus Member

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    can I claim this if I use my car only for commute to work..
     
  16. MelaniainLA

    MelaniainLA Member

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    Nope -- if you are an employee (paid on a W2 and work for someone else) you cannot claim a business deduction for commute but you CAN under certain circumstances claim unreimbursed mileage during work as required by your job -- for example, if you did pizza delivery and were paid as an employee. These deductions are intended for people who are business owners and use the car as a business vehicle -- for example, a doctor going to the hospital on call, a real estate agent taking customers to see houses, a consultant visiting clients, etc. Commute is NOT deductible, otherwise everyone would be doing it.
     
  17. kort677

    kort677 Active Member

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    There's a lot of dangerous advice in these posts in matters like this it would be wise to seek out a professional like a cpa or a tax lawyer for advice
     
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  18. MelaniainLA

    MelaniainLA Member

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    100%!! Never make such assumptions without professional advice from someone who is familiar with your situation. I did and it was well worth it!
     
  19. CarbonFree

    CarbonFree Member

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    Doesn't this tax benefit also apply for cars purchased in 2018?

    MelaniainLA, you must work for Tesla, is that right?
     
  20. MelaniainLA

    MelaniainLA Member

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    @CarbonFree Yes, they do work in 2018 BUT the 50% bonus depreciation is reduced to 40% then, from what my tax person told me. 2017 is the end of the big discounts.

    Nope, I have no financial relationship with Tesla other than getting a Tesla solar roof priority token (which I don't need as I live in a condo) if someone uses a referral from me (they can have it -- or you can have it!). I'm an eye surgeon (like seemingly 10% of the other owners on this forum!). I was recently made aware of this and am jumping at the chance to lock in the full write off before end of 2017 and thought I'd share. On top of that, when we bought our Model S, our OA in Century City, CA bent over backwards to accommodate an insane request we had for a change to the car DURING production -- thanks to him they took the car off the line and made the change free of charge, just to keep us happy. In return (he never asked), I promised to give him an opportunity to help people out who are interested in a purchase :)

    Maybe I should quit my day job and work for Tesla, eh? ;) haha
     
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