I think those are the key elements that are necessary that a lot of people miss. You have to be home-based, because otherwise your commute drive to work is personal and not business. And you have to have a second car for all your personal use. Well done.
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Time running out for Model X 2017 *massive* business-use tax deduction
- Thread starter MelaniainLA
- Start date
I think those are the key elements that are necessary that a lot of people miss. You have to be home-based, because otherwise your commute drive to work is personal and not business. And you have to have a second car for all your personal use. Well done.
This is great detail. Does anyone know if this deduction is still applicable for 2018? My wife is looking at a Model X and I thought that the vehicle had to be in the name of a business to get the credit/deduction but looks like people on this forum have been able to get it without. Is the deduction valid if one is buying a used car or just for new cars?
Valid for 2018. In fact for 2018 it got better. Up to 100% deduction in first year based on % business use as long as >50% business use. Moreover, now used cars over 6000 lbs GVWR (NOT curb weight which is lower) qualify. Talk to your tax person to confirm. It’s now 100% bonus depreciation rather than 50% bonus depreciation! I’d buy new as used X aren’t as good quality plus considering the $7500 back from Feds for new EV the price is pretty close! Happy to discuss. Send me a PM and I’ll send you my cell. Did under my own name but I’m a sole proprietor.
Does the Model S qualify given the new gross weight rules?
Great thread, but does this work for Schedule E filers? I notice this all relates to Schedule C. We have a simple rental property that we manage ourselves (meet IRS criteria for "active management"). We drive there about twice a month to work on it and the trip's about 250 miles each time, so over 60% of our annual driving in the X.
But as Sole Proprietor we've always just done Schedule E. Do you all think we might qualify for the Section 179 expensing and bonus depreciation in our scenario doing Schedule E? We do Section 179 for things like appliances, but TurboTax doesn't list vehicles (just "Tools, Machinery, Equipment" is probably the closest).
Our rental business only grosses about $50k/year annually, and after expenses we usually claim a few thousand $$ loss anyway, so I doubt this "loophole" could even benefit us in the first place.
Would love y'all's thoughts/input.
PS--asked my CPA but he doesn't know. If this deduction seems feasible we'd seek a CPA who knows about this sort of stuff.
But as Sole Proprietor we've always just done Schedule E. Do you all think we might qualify for the Section 179 expensing and bonus depreciation in our scenario doing Schedule E? We do Section 179 for things like appliances, but TurboTax doesn't list vehicles (just "Tools, Machinery, Equipment" is probably the closest).
Our rental business only grosses about $50k/year annually, and after expenses we usually claim a few thousand $$ loss anyway, so I doubt this "loophole" could even benefit us in the first place.
Would love y'all's thoughts/input.
PS--asked my CPA but he doesn't know. If this deduction seems feasible we'd seek a CPA who knows about this sort of stuff.
One neat way way to ensure maximum business use is my wife and i own our own firm so we constantly have business meetings and discussions in the car driving to so and so. Our CPA says that even if we are driving to somewhere for personal reasons (i.e. supermarket etc...), our use could probably still qualify as business purpose because of the "business meeting" we had during the drive is akin to driving to a client meeting etc..
Our CPA is pretty conservative as well.
Our CPA is pretty conservative as well.
Question to people who did it already. They might answer this one since already went trough buy-refund process:
I have brand new business. No profits yet.
Let's say i bought 75k X. Can I claim 75k business use refund next year, and we'll I get anything back if I had no profits or paid less than 75k in taxes?
Given 100% business use.
Also will YouTube channel qualify as business? Let's say I'm streaming only about this car, trying to get income?
Thx in advance
I have brand new business. No profits yet.
Let's say i bought 75k X. Can I claim 75k business use refund next year, and we'll I get anything back if I had no profits or paid less than 75k in taxes?
Given 100% business use.
Also will YouTube channel qualify as business? Let's say I'm streaming only about this car, trying to get income?
Thx in advance
I am not an accountant:
It's a deduction, not a refundable credit, so you would not get anything back beyond what you already paid in taxes.
Your business needs to be able to show profitability after a few years. Not sure your stream will cover the costs.
Agreed — you can show a loss and have a loss transfer into a subsequent year... but you have to pass the laugh test with this. You may get audited and if you do, you’ll need to prove that this was TRULY a business and not a “hobby” or excuse to get a 100% writeoff... they’ll particularly scrutinize your written mileage logs day by day and compare alongside your video production work and ask for proof that you didn’t use for ANY personal use. You’ll also need a separate personal vehicle throughout that time to be able to substantiate it.
Happy to discuss offline as I’ve been through it already — Send Me a PM if you’d like to chat anytime... or with specific questions.
I gotta say, you're one helpful fellow. Appreciate your contributions to this forum.
2017 was my transition year from military to full time entrepreneur. I closed it out with about -$8k. I'm on track to be break-even this year and maybe make a profit.
In order to section 179 your MX, it had to be under assets in TurboTax vs vehicles, right? And it can only go there because of its weight, correct?
Thank you for your service, and a pleasure to return the help so many other TMC members generously offered me over the years.
I just did 179 (100% depreciation) for 2017 using TurboTax. When TurboTax runs you through the business questionnaire and lands on the expenses, one of the questions is “did you use a business vehicle?” Followed by something like “did you buy it new?” Then “was it a heavy SUV over 6000 lbs GVWR?” And then goes into documenting business percentage and all auto related costs like taxes and registration (you can add floor mats and tinting and dash cam etc too!). Once you do all that, software will do whatever is needed in the paperwork. I do think it gets classified as a business “asset” as a percentage of business use. When you go to claim the $7500 federal EV credit late on, it references the business percentage and kicks that percentage to a special form for “business credits.”
Complicated but thankfully TT knows how to handle it all! Phew!
Great brake down! Thanks a lot for info!
Iguess I'll wait until i get profitable then.
But this is great help for businesses and for Tesla. Elon needs some support.
Iguess I'll wait until i get profitable then.
But this is great help for businesses and for Tesla. Elon needs some support.
A pleasure! You don’t need to be profitable to take it. If you’re not profitable, you take a Net Operating Loss on your taxes which carry forward against profit in subsequent year(s) for the same business.
Happy to discuss in person. Feel free to PM me anytime!
Since there’s been some confusion around this and I just types the following up for someone else in a PM, thought I’d clarify the new rules under the Trump Tax Law — See below and if you want to reach me personally with any questions my email is hdhemmati at gmail dotcom:
I was totally clueless about this 179 deduction and bonus business depreciation business for heavy SUVs (>6000 pounds GVWR or “Hummer Loophole”). Then my uncle did it and then I discovered some friends did it too. I hired a tax attorney to give me an official opinion (paid her $150 for 30 min time on phone) so that I would have this documented and protect myself in case of issues down the line and prove that I did my diligence on it.
Basically, under the new Trump tax plan (Effective late September 2017), you get to deduct up to 100% of the Model X value off your taxes as a proportion of its BUSINESS use in the year you buy it without needing to depreciate over several years as before. For example, say you buy a Model X in May, and you use it 75% for professional work (consulting, wedding photographer, private doc, whatever you do) and 25% personal, and the car cost $100k including tax, you deduct $75k off your federal taxes (and an appropriate proportion off state based on your state rules - you have to depreciate the state component over 5 years in my state of CA) -- you might report a loss but that way you get $$ back year of the following years. The business
ersonal ratio has to be DOCUMENTED and believable and must exceed 50% to trigger. You can't say easily 100% unless you did what I did: I bought it 2nd to last week of December. I kept my old car until Jan 2. I drove the X ONLY for business and then left it alone in my garage until Jan 1. That way, I got to say 100% business! $100k car, after tax, ended up costing me $50k. Not bad, eh? You MUST have documentation in the form of a mileage log (handwritten) ideally supported by odometer readings using Tesla Service records. The IRS can (and often does) request the documentation at audit time.
Math was as follows:
Car after tax: $100,000
Section 179 Deduction: $25,000 (heavy vehicles only)
100% bonus depreciation: $100,000-$25,000 = $75,000 (new Trump tax plan effective late September 2017 and beyond; previously it was 50% bonus, which meant $37500, not $75,000)
Total write-off from federal taxes: $25,000 + $75,000 = $100,000 (100% of the car)
The key, therefore, is to keep business use to a maximum level in 2018 so you get the maximal deduction upfront.
I do my own taxes btw... This was relatively easy to do in TurboTax but some accountants aren’t yet up to speed on the Trump tax changes. You can get a loan and pay the loan off over time, but take the tax deduction RIGHT away. So I have a loan from tesla at 1.49% interest and I deduct the interest as well!! But the PRINCIPAL (the cost of the car + tax) got written off immediately!
Moreover, through all/most of 2018 you'll get $7500 off your taxes from federal government for having an EV, ON TOP of the 100% immediate tax deduction, making it even cheaper. That is on top of any state and local incentives you might be eligible for ($2500 from CA state and $500 from LA City for us). And if you order through a referral link from an existing Tesla owner, you get free lifetime supercharging access.
Happy to discuss with anyone here in more depth (PM or email me) -- all this depends on your tax situation etc so might be worthwhile confirming with accountant (if you have one) re your personal situation before taking the plunge. For what it's worth, I'm VERY happy I did! You'll LOVE your car as well. A lot of people on Tesla forums and TMC bent over backwards to help me make purchase decisions (battery, colors, options, etc) and we are all here to help you with your choices as well.
Good luck!
I was totally clueless about this 179 deduction and bonus business depreciation business for heavy SUVs (>6000 pounds GVWR or “Hummer Loophole”). Then my uncle did it and then I discovered some friends did it too. I hired a tax attorney to give me an official opinion (paid her $150 for 30 min time on phone) so that I would have this documented and protect myself in case of issues down the line and prove that I did my diligence on it.
Basically, under the new Trump tax plan (Effective late September 2017), you get to deduct up to 100% of the Model X value off your taxes as a proportion of its BUSINESS use in the year you buy it without needing to depreciate over several years as before. For example, say you buy a Model X in May, and you use it 75% for professional work (consulting, wedding photographer, private doc, whatever you do) and 25% personal, and the car cost $100k including tax, you deduct $75k off your federal taxes (and an appropriate proportion off state based on your state rules - you have to depreciate the state component over 5 years in my state of CA) -- you might report a loss but that way you get $$ back year of the following years. The business
ersonal ratio has to be DOCUMENTED and believable and must exceed 50% to trigger. You can't say easily 100% unless you did what I did: I bought it 2nd to last week of December. I kept my old car until Jan 2. I drove the X ONLY for business and then left it alone in my garage until Jan 1. That way, I got to say 100% business! $100k car, after tax, ended up costing me $50k. Not bad, eh? You MUST have documentation in the form of a mileage log (handwritten) ideally supported by odometer readings using Tesla Service records. The IRS can (and often does) request the documentation at audit time. Math was as follows:
Car after tax: $100,000
Section 179 Deduction: $25,000 (heavy vehicles only)
100% bonus depreciation: $100,000-$25,000 = $75,000 (new Trump tax plan effective late September 2017 and beyond; previously it was 50% bonus, which meant $37500, not $75,000)
Total write-off from federal taxes: $25,000 + $75,000 = $100,000 (100% of the car)
The key, therefore, is to keep business use to a maximum level in 2018 so you get the maximal deduction upfront.
I do my own taxes btw... This was relatively easy to do in TurboTax but some accountants aren’t yet up to speed on the Trump tax changes. You can get a loan and pay the loan off over time, but take the tax deduction RIGHT away. So I have a loan from tesla at 1.49% interest and I deduct the interest as well!! But the PRINCIPAL (the cost of the car + tax) got written off immediately!
Moreover, through all/most of 2018 you'll get $7500 off your taxes from federal government for having an EV, ON TOP of the 100% immediate tax deduction, making it even cheaper. That is on top of any state and local incentives you might be eligible for ($2500 from CA state and $500 from LA City for us). And if you order through a referral link from an existing Tesla owner, you get free lifetime supercharging access.
Happy to discuss with anyone here in more depth (PM or email me) -- all this depends on your tax situation etc so might be worthwhile confirming with accountant (if you have one) re your personal situation before taking the plunge. For what it's worth, I'm VERY happy I did! You'll LOVE your car as well. A lot of people on Tesla forums and TMC bent over backwards to help me make purchase decisions (battery, colors, options, etc) and we are all here to help you with your choices as well.
Good luck!
This should probably be a new thread. While “time is running out” for 2017 rules, the tax impact for 2018 purchases is even bigger and should probably be called out separately.
