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Would Model X Also Qualify for the Section 179 deduction?

Discussion in 'Model X' started by DavidM, Dec 5, 2013.

  1. DavidM

    DavidM P2624, Delivered

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    There is no doubt that the Model X will qualify for the $7,500 EV tax credit. But would the Model X also qualify for the $25,000 heavy SUV Section 179 deduction? I guess the X would have to weigh much more than the Model S to qualify. A qualifying SUV would have to weigh at least 6,000 pounds (1,300 pounds more than the S). And the vehicle would have to be used more than 50% for "business purposes". I don't imagine it would be that heavy, but if it was, the combined incentives would be huge.
     
  2. Shumdit

    Shumdit Member

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    David, I do not think that is correct. The GVWR needs to be over 6000 lbs, but that means the max. loaded weight (all passengers and cargo). It is possible being a 7 passenger AWD vehicle it will qualify.
     
  3. youlikeadajuice

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    Why on earth does a "heavy SUV" deduction exist? Especially for $25k?
     
  4. Shumdit

    Shumdit Member

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    It was originally a section for equipment purchases to stimulate the economy during the recession, but I am sure some GM or Ford lobbyist got this added to it to help sales of Escalades and King Ranch trucks.
     
  5. Blastphemy

    Blastphemy Member

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    Just to clarify, this is a business deduction; not something available to individual taxpayers.
     
  6. yobigd20

    yobigd20 Well-Known Member

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    time to form a new S corp. hmmm.... is it a credit or deduction?
     
  7. Solarguy

    Solarguy Member

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    I was thinking S Corp. or LLC as well.:smile:
     
  8. DavidM

    DavidM P2624, Delivered

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    You can take this deduction even if you are a sole proprietor (ala individual taxpayer). Think Mary Kay salesperson, Amway sales, independent real estate appraiser, broker, or independent agent, independent courier, pool boy, independent interior designer or decorator, and certainly all the trades, etc. You just have to have a big and heavy SUV (over 6,000 lbs that you use at least 50% for business). The car doesn't even have to be new. Used cars qualify. The cost of the car offsets your income up to $25K. Check it out with your tax advisor. Makes you wonder why everybody's fussing over the EV tax credit.
     
  9. DavidM

    DavidM P2624, Delivered

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    I believe you are correct. I checked on the following link: http://www.alphaleasing.com/businessaspects/over6000gvwr.asp
    So, then I'm pretty sure that the Model X SUV will qualify because the X will weigh at least 4,700 lbs, and it will easily carry more than 1,300 lbs of passengers and cargo. And yes, it's technically an SUV even though Tesla prefers to consider it a crossover. I'll have to ask a tax adviser if you could technically take BOTH deductions. If so, then the Model X could wind up being much cheaper than the S.
     
  10. Blastphemy

    Blastphemy Member

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    To be a sole proprietor, one must run a BUSINESS. And if your business doesn't make any profits (because you set it up as a ruse to claim a Section 179 dedution), you'll have nothing against which to deduct the cost of the Model X, and therefore you will not save any money. Hence my original statement that this is a business deduction; not something available to individual taxpayers (i.e., "employed by someone else, not self-employed").
     
  11. jerry33

    jerry33 S85 - VIN:P05130 - 3/2/13

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    Unless you have itemized deductions from employment that you can claim.
     
  12. yobigd20

    yobigd20 Well-Known Member

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    Wow. That would be great if you can claim both. Get a Model X for $37k!!! Incredible!
     
  13. Barry

    Barry Member

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    A deduction is different than a credit. Multiply the deduction times your tax rate for the savings.
     
  14. yobigd20

    yobigd20 Well-Known Member

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    Oh I tried to ask earlier if it was a credit or deduction. If it's a deduction then obviously much different.
     
  15. DavidM

    DavidM P2624, Delivered

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    I agree that you have to run a "legitimate" business to take the Section 179 deduction. However, most American businesses have just one employee (the owner). And there are a lot of one person businesses that do turn a profit. Many of those businesses make money because they have little or no overhead or equipment, and they are just selling the owner's time and expertise. A good example is a pool man (cleaning & maintenance). They typically have a vehicle (pickup or SUV), a trailer, chemicals, and a computer and printer. A good pool man can make $50K to $80K of profit a year as a sole proprietor.

    The $7,500 EV Tax Credit is a "Credit" - meaning it's a dollar for dollar reduction in Federal Taxes owed.
    The Section 179 deduction is a "Deductible Business Expense" - The Federal Taxes saved depend on your tax bracket and the amount of the expense.

    Here's a simple example for our Pool Man Sole Proprietor:
    $100,000 - Sales Revenue
    ($30,000) - Business expenses
    $70,000 - Gross Income
    ($25,000) - Section 179 Expense (from qualifying vehicle purchase)
    $45,000 - Taxable Income

    This Pool Man would be in the 25% Federal Tax Bracket (single filer) with or without the Section 179 Expense.
    Since he reduced his taxable income by 25%, he saves $6,250 in taxes owed.
    If the car was a plug-in EV, then presumably you could also take the $7,500 tax credit (if you owed that much in federal tax)

    I still need to find out if you could actually take both the credit AND the deduction.
     

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