Free downloadable Handout and More: www.dropbox.com/s/xicffrcy2s8y3s0/179%20vehicles.docx?dl=0 Our Complete Tax Video Library Can Be Found Here: ruclips.net/video/-O1SWSdWTGE/видео.html Section 179 Explained: ruclips.net/video/y8fvXw7xTnE/видео.html Where to find more information on depreciation? Publication 946 is your friend: www.irs.gov/pub/irs-prior/p946--2018.pdf Publication 463: www.irs.gov/pub/irs-pdf/p463.pdf
Time stamps so you can jump to any point in the video at any time. 0:53 When does 179 apply for vehicles? 1:51 Determining business use for personal use 3:03 Why Gross Vehicle Weight Matters 4:00 Example of how section 179 works 5:07 What is Section 280-F? 9:39 Vehicle weight ranges for tax deductions 11:40 When no section 179 limits apply
Do I need a business license in order to apply for this section , I don't remember the section number, I belive was 179 section, example if I wish to use my vehicle, for uber or taxi business, I don't have business license, but at the same time I want to buy and use a car for business, so once again to resume, do I need a business license in order to apply for a vehicle deduction, and if using my future car for uber will count as using the vehicle for business.
Good morning internet! This video is long over due. Tax time will be approaching in the next few months so this video will help you get prepared if you are a business owner or thinking of becoming a business owner. To support the channel CRUSH that like button, share this with a friend or comment below. Thanks for the continued support RUclips fam. Nearly 30,000 people in this community now.
Thank you for posting this video, I took a 18100$ deduction for the federal tax and it help me but it increased my taxable income for the state and I have to pay a lot back on the state.
Thanks -- you answered my 2 main questions... #1 how much % of the time can be for personal vs business, and #2 when can you use 179. So, after watching this I went and talked to my wife about section 280f, and she wasn't impressed! I mean, really, she isn't even impressed with my awesome spreadsheets I create! Some people!
Haha your comment actually speaks volumes GenEx. I know exactly what you mean about people not valuing what you do.Taxes and finances can be so complex that people do no understand the value of they are receiving, because they simply don't understand how difficult it is to get this info for free. I knew when I published this particular video it probably wouldn't get that many views. During tax season though I think people will find this helpful. You can give away so much for free, but so many people won't value it. My tax videos I consider to be my highest value content, because you cannot simply find this information for free. Find for free and understanding it, and knowing the most "current" law is very hard to do unless you work in the profession. I'm sure most people value what you do, but there always be those who don't, and we don't worry about them. People love get rich quick videos, and entertainment videos, but the real value is found in technical videos. That is where the real learning is at. I could do "reaction" videos, but I believe in actually teaching something useful.
@@MoneyandLifeTV Haha, so true. My favorite video you did was actually the one where you showed how you set up your tax spreadsheet for your RUclips channel's business income & expenses :) Though it probably didn't get you the most ad revenue...
ahh glad to hear it. You will be pleased to hear I will be showing how to fill your tax forms for YouTub. Step by step :) Stuff I probably shouldn't give away for free, but ah what the hell lol. That video will come towards end of this year or beginning of next year.
Thank you for sharing your knowledge. I found your videos are very educational and informative. I am an accountant too but I don’t do much taxes staff, your videos keep posted on current taxes rules. Keep up with these good videos!!!
My pleasure Yang, thanks for commenting. Are you in Audit? Creating these tax videos helps me remember all the rules. Sometimes I go back to re-watch them to refresh my own memory.
Excellent topic, I new nothing about this until reading a book about selling. Now, I might be wrong but are those deductions of 18,000, 10,000, 16,000 and 9,600 only if you use the vehicle 100% for business
Thanks for the info. Just remember that your revenue needs to be high enough to offset the deduction. In this economy, cash flow is key and cash will remain king for the foreseeable future. Buying a high cost asset just for the deduction isn’t a prudent move.
So writing off a 100k truck opposed to paying 30%-50% in taxes isn't prudent based on a future liability? Or are you referring to throwing the extra money into a future asset without the liability?
I retired in Aug 2017 and took a sales/consulting position with another company. 2017 tax bill was close to even. For 2018 I paid in about $400 writing off mostly miles and a few things I bought for my home office. This past year(2019) I started consulting for a business and my sales went up also. My tax bill for last year is going to be 4k. I may need to buy a truck? This is what brought me here.
Great informative video! I have a question though, regarding a 'vehicle for hire.' I run a limo business, and after purchasing a limo a couple years ago, I wanted to take depreciation on it. So, as I'm trying to figure out the proper basis, method, etc., I have a quandary: In Pub.946, at Ch. 5, "Additional Rules for Listed Property," under the section, "what is listed property?" it describes various things that ARE listed property... which of course, includes passenger vehicles. BUT, it says the following is EXCLUDED from the definition of 'Passenger Vehicle': "A vehicle used directly in the trade or business of transporting persons or property for pay or hire." So, OK, Fine... BUT, just the next Paragraph: "Other Property Used for Transportation", it says that while vehicles used for hire (which is exactly what my limo is for--even though it is a regular sedan), are not considered "Passenger Vehicles," but instead, ARE considered "Other Vehicles Used for Transportation." What I cannot understand is, what is the difference? What does the qualification 'Other Vehicles Used for Transportation' GET me? Am I permitted to take a full write-off under 179? My limo is used 100% for booked limo runs, but it's not at all clear in the Publication, as nothing is said AFTER the heading, except to mention which vehicles are excluded from the definition (Note: I'm aware that I can't for this vehicle, as I bought it 2 years earlier, but would like to know for future reference) My understanding is, it means I must itemize all costs (no std. mileage rate for commercial vehicles--and mine is), but I CAN depreciate 100% in the 1st year. I am ALLOWED to choose to do that OR, can still go ahead and do a 5-year depreciation. My particular choice IS to do a 5-yr depr. using GDS, Straight Line, Half Year convention. I just don't know if any of the 'definition' given under the "What is Listed Property" precludes me from using that method to depreciate my limo over 5 years. Thoughts? Thanks!
Hi Dean, good questions. Unfortunately I do not know the answer off the top of my head without doing actual tax research. If you want to be conservative tax wise I would lean towards taking the 5 year method. You can probably still take 179 to some degree. I would suggest also researching further on google, and IRS website. Also consider consulting with an accountant who has experience working with businesses similar to yours. You will want to consider your all over tax situation. If you expect your income to be higher in the coming years having that depreciation available spread over 5 years may help "Normalize" the tax hit. It would be a shame to take all the depreciation in the first year if income is low or at a lost due to the circumstances of Co-vid. Something to consider.
Could you make a new updated 2024 version if you have time? Doordash and grubhub more drivers then ever. Curious if a low cost vehicle could be a tax advantage in some form or fashion
I have thought for a long-time about doing a video on bonus depreciation. I will make a few more videos for tax deductions for vehicles though regardless. Lots of deductions at play, and lots of rules. I love bonus depreciation though. Use it quite often for my clients.
Nice video!! One day will you please consider covering one on vehicle Depreciation with actual expenses method. I really think your lives stream are helpful and intuitive thanks for all you do!!
Christian how's it going man? I certainly will plan to do a video on depreciation with actual expenses at some point. Perhaps around the time of next tax season. Lots of weird/complicated rules around car expense deductions so I try to break this stuff out in one vid at a time so it is digestible. Thanks for the topic suggestion!
Nice informative video. I would love to see a video on the pros and cons of purchasing, financing or leasing the section 179 vehicle. For example - if leasing, what happens when your lease ends?
Thanks for the topic suggestion. I think with leases and taxes the lease agreement terms holds a lot of weight in terms of how the transaction may play out from a tax perspective.
@@MoneyandLifeTV interesting. Leasing seems attractive because usually the initial outlay is low, and the payments are lower too. I've read that you can still take the deduction even if it's a lease. I'm just confused on how that plays out when your lease comes to an end.
I think it depends on whether is is an operating lease or capital lease. I think if you research those terms it will shed further light on your question.
Can you tell us, your subscribers on how to calculate depreciation on a business vehicle? Thanks and greatly appreciate it everything on your RUclips, very helpful.
Hi Lin, thanks for the suggestion. Depreciation is very complex, but perhaps I can find a good depreciation calculator for viewers to use to calculate depreciation. I have yet to come across a good excel doc to help calculate it. But just FYI if you are using straight line depreciation you would depreciate a vehicle over a total of 5 years. each month you get 1/60 of the depreciation. In a nut shell that is how it works. I would suggest googling "depreciation calculator" and see what comes up. Its not perfect, but will probably serve your purpose. Honestly even if your depreciation calculations are slightly off the IRS probably will not care as long as you in the ball park. That is what an IRS auditor told me.
Best video about depreciation and the 179 deduction i have seen. Thank you. quick question, what happen if you fail or let said you loses your mileage records. can you still or not get that deduction if you do not know the exact amount of mileages?
Hello thanks for the information. I was wondering what if you purchased more than one vehicle in a year and you wanting to depreciate over the five-year period so how does that work even though you’re only up to $10,000 per year
What if I buy a car and wrap it in vinyl with my companies logo. Would that be considered using it for business 100% of the time because I am using it for advertising?
James I like the way you think. Unfortunately that would not suffice as 100% business use. However, it doesn't mean you can't make money from advertising :)
Since you purchased the vehicle for business use, it is already an assumption that you will use it a 100% of the time for business. However, if you use it for anything else, you've used it a faction of that time.
Thanks Ankita, I really appreciate your feedback as it took me quite awhile to figure out how to present this information in a way that people could understand.
thanks for the video very helpful, have a question if I have 2 vehicles and use both for business, can I use different methods for deduction 1st one with standard milage and the second one with actual expenses with depreciation and using the 179 section. thanks
Excellent content! I have a couple questions, I have a rental property bringing in around 14k a year and opened an LLC and putting the business as property management. I plan on purchasing a tesla model 3 and also using it to uber. Are these side hustles eligible for the 280F eductions granted I use my vehicle 50%+ of the time?
I have two cars I use 80% for business and the cost down pay for the cars was 118,000. My individual car weighs less than 6000 pounds . Please help me with how much I can deducted max in first year
Soooo if I have a car youtube channel and am constantly recording using the built in cameras and making videos with and about the car... would that count as over 50%? haha...
I want to buy a car for my LLC. However, I don't need big SUV over 6000lb. Can I buy a compact SUV (less than 6000 lb) and get buying depreciation for first year?
Great explanation. I had a question I'm hoping you can answer. I have a vehicle that I currently use for business and personal use (though I've never claimed section 179, only claimed millage that I drive). I don't owe any money on this vehicle and it's currently worth around $13,000 trade in. I'm looking at a vehicle that would cost about $25,000 so the difference I would have to pay would be around $12,000 if I traded in my current vehicle. So in that scenario would my purchase price be $12,000? Or does the trade in count as $13,000 cash? On other words, could I claim up to the full $18,000 for a qualifying vehicle even though the only real money out of pocket was $12,000? The second question I had is If I financed that $12,000 difference could I still claim the deduction? Normally I wouldn't finance, but given that the rates are at 0% because of the pandemic, It doesn't hurt to have a little extra cash in the bank if I don't have to pay any interest.
Hi Cameron great questions. To answer your 1st question $25,000 would be the cost of the new vehicle. The trade in is treated like additional cash. If this were a like kind exchange my answer may be different. The amount of 179 you can take depends on how much you are going to use it for business, vehicle weight, etc. At a minimum you could probably deduct $3,000 - 11,000 in the first year. Possibly $18,000 if it meets all of the tests for the max 179 deduction. Second question. Financing has no impact on section 179. However, the interest on the loan may be deductible to the extent you use it for business. Hope that helps.
You can use mileage or actual expenses such as (Depreciation, repairs, license fees, etc.) That best advice though that I can offer is to keep detailed mileage logs. Most people fail to do this. Keep a separate of books for your Uber and lyft business, and all associated expenses. In theory anything you do specifically for a "Business related purpose" (and not for personal use) can become a deduction. Just be wise about how you spend your money. Never spend money just for a tax deduction. Only spend money if you actually need something for your business.
What about a suv weighing 5k, could it be loaded with 1,050 pounds to bump it up to the over 6000 for the 25k limit? I'm not sure how you would estimate how much would be the fully loaded load limit. You said truck or van, not suv. So I'm wondering can I claim the 25 deduction for a fully loaded suv weighing 6,000 pound or more.
When you say ”when a vehicle is put in place” does that mean that the car has to be new?? I’m looking at a used car and wonder if I can do this. So hard to find this info, happy for any help.
Based on mileage and vehicle weight qualification. So business usage means from point A of business to point B of conduct of business. Now there are room for rest stop, if your home happened to situated in the middle of the trip? A vehicle when parked could also be exploited for a personal usage like a rockstar DHL/FedEx delivery van??
Great question. You could rest stops. As long as majority of the miles are for business or in the due course of business you won't have any issues. If you are between trips from point A to point C and you stop at point B for a quick break I would still count that as business. As long as you are true to your intentions you should be good.
So I do a few side jobs, licensed real estate agent and landscaping. When I buy a truck for over 50% business use, do I have to be operating as an LLC? Can the vehicle be purchased in my name? I have heard dealerships requiring information to prove your a business owner. Any comments is appreciated.
Great Video! QUESTION 1: When you finance a vehicle, can you still input your down payment in expenses and still depreciate QUESTION 2: Do you still expense your monthly loan payment after doing the above
Hi Linda, great questions. Since depreciation already factors in the "total cost" of the vehicle you would not be able to deduct your down payment as well, because you essentially be getting a double deduction. For your second question the answer would be "No" but you can deduct any interest expense you pay on the vehicle loan. All of this of course assumes the vehicle is used for business purposes. If not used 100% for business deductions start to become limited. to the business use percentage.
So in 2020 i plan on creating an LLC and getting my license number to start taxing my income from my wood working but i have some questions. I'll still be working my normal job which i earn around 50k and my wood working buisness i only made 8k last year. My wood working was a hobbie that is starting to become bigger. I do not pay tax on it but i'm assuming i should start? Also i was looking at buying a new truck to help with the hauling and selling my car. If i buy a new truck that is 50-60k and i'm making less than 10k a year at the moment with my wood working that by then will have an LLC how would Section 179 work for me? can i still write off my truck if i'm earning less than 10k a year? I'll be using it around 75% of the time for my buisness and using it to get me to my normal job and back. I'm not trying to do anything wrong i just want to make sure i'm doing everything right.
Hi Gazz, good questions. It is smart of you to ask. If your wood working is becoming a business than you will want to start filing taxes for this income. Remember you can offset your business income with any applicable business expenses you incurred. In terms of the truck purchase I would advise against taking 179 or bonus depreciation if you do not expect to have a lot of income from the business. I say this because a large loss can make you a target for a potential audit. Your chance of that happen is low, but still something to watch out for you. Honestly in your situation I wouldn't want to deduct all the first year. That deduction is better served in my opinion once your income goes up. You want those expenses to offset your business income when you are in a higher tax bracket, not when you are in a low one with hardly income. Instead of a $1 deduction saving you 12% in tax it would be more productive if that $1 was saving you like 24% or 22% in tax. Therefore I probably would not recommend taking accelerated depreciation based on the facts you are providing, but that is your call. Losses can carryforward to be used in future years. There's more to it than that, but those are some of things I think you should think about. Hope that helps.
Hi DJ great question. With software it is a bit more straight forward. In most circumstances software is amortized/depreciated over a 3 year period or 36 months using the straight line deprecation method. I don't know off the top of my head, but it may be eligible for 179 depreciation as well meaning you could probably write off the costs in full during the first year.
Very very informative video!! Quick question: So currently I work for instacart and I plan do to the standard mileage deduction as a write off. What else can I write off working as a instacart shopper? I recently financed my car, still paying it off, and I literally use this car for work only. I work everyday of the week. I would say 90% work/ 10% personal use. How can I use this to maximize my tax write offs?
Hello Mike i am planning to buy a vehicle mainly to rent in Turo. Lets say Vehicle price is $60k with 6k GVW above. My monthly payments will be $1000/ month or $12k a year for next 5 years and from Turo i am expecting $7k a year for the next 5 years as income. With these numbers what is the max i can deduct using sec 179 and bonus depreciation? Can i depreciate $18k,$16k,$9.6k,$5.7k each year even though i am only making $7k a year (is there any minimum amount we need to make from business to qualify the full depreciation amount?) Thank you for your time.
I’m having a hard time understanding. So when people say “I’m writing off the car” the person claims the full 18,200. Does the irs send a check to pay the vehicle?? Might be a stupid question.
Great question actually. Typically they write off as much as they can the first year which is around 18K for most vehicles. Sometimes it less depending on the business use of the vehicle and the type of the vehicle. Generally though most businesses (with a few exceptions) cannot write off the entire vehicle in the first year. Typically the first year write off is 11k-18k The IRS does not send a check. All of the activity is reported on that person's tax return and the vehicle deduction will lower there overall business income, thus lowering their taxable income.
Hi I just talk to hr block, the lady confused me... If I buy a car over 6,000 pounds I'm a sole proprietorship, say I paid $80k, & don't owe the irs and I use 179 accelerated depreciation within the first year, when I file my taxes will I get the full 80k back returned into my account?
Hi Candance great question. If you get an $80,000 deduction you will not necessarily get $80,000 back. If the deduction wipes out your tax liability your refund will be just whatever you paid in through estimates and withholdings throughout the year. You can only get back what you paid in. If you end up having an excess loss it will often carry forward into a future year until you have more taxable income to deduct it against. However, with section 179 you can only accelerate depreciation to the extent of your business income. In other words you cannot make your overall income go negative with section 179. So the short answer is no, hope that helps.
Is there an exclusion for a luxury vehicle such as the model x? Also when you buy the vehicle do you have to register it under the business or the name?
Does this only apply when the full purchase price of the vehicle is paid up Front or does it also apply when the vehicle was purchased with a loan? This video was a great help thank you very much!
Hi Andy, great question. Good news is whether you pay cash or take a loan to finance the vehicle it won't matter in terms of taking accelerated depreciation.
Thanks for the video! One question - how does this work if you finance a vehicle - for example - if you finance a $30,000 vehicle and only put $5,000 down, can you still take the $10,000 179 deduction?
Hi Alex wonderful question that many people ask. Yes, financing a vehicle does not prevent you from taking 179. Just know that it will depreciate the value of the vehicle quicker. If you sale the vehicle later on there is a chance you will have to recognize part of the income on the sale at that point. This is known as "1245 recapture." Just something to be mindful of. Hope that helps.
Hi there. I'm a higher income earner on a W2. My wife and I own an LLC that we started this year. I've found a nice cargo van that I can place into service for our LLC. Can I use the 179 depreciation to help offset the tax liability of my W2 income since the LLC is considered pass through income? I realize it would be unusual to to claim a $25k expense on an LLC that only has a few months left in 2020 to earn. We're at 0 so far for earned income for the LLC
So I have a question. A van is mentioned, but my thought is starting a mobile unit in an RV for health therapies. How does this apply regarding deductions? thanks
Hi Woodbe, good question. One I don't know the exact answer to. In that instance the vehicle is being used primarily as "equipment" in a sense vs normal vehicle usage. You can check IRS publication 946 www.irs.gov/pub/irs-pdf/p946.pdf . I suspect an RV for therapies would not be depreciated like a normal vehicle, but I could be wrong.
Hi Jousha, yes, you may find the deductions are limited to income depending upon the type of expense. Section 179 for example is limited to business income.
Say you bought a vehicle with a loan, in this case you can't deduct 100% in year 1 because I didn't pay off the vehicle. So the best I can do is use bonus depreciation or just regular depreciation?
Hi Code, the loan itself has no affect one way or another on the use of bonus. In some circumstances you may take full 100% bonus, but it just depends. Please review IRS publication 946 for further instructions.
If I used section 179 this year (for a $25,000 deduction of $43,000 Toyota Tundra short bed,) and sell my business next year, and plan to keep said vehicle after the sale, do I have to pay the section 179 deduction back?
Can you write off personal vehicle modifications if it includes company branding (e.g. a car wrap)? So even though you would be using it for personal trips every time you would drive it the outward branding of the car count? Any reply would be greatly appreciated
Thanks for asking scott, no it does not. You can buy it personally and contribute the car as a capital contribution to the business. That is if you want to depreciate it If you want to take the mileage deduction than you would not depreciate the vehicle. You could also setup a note due to shareholder to have the business pay you back for the vehicle.
Thank you for all your help. This is a 2 or 4 parter: first off, if the vehicle weighs less then 6000lbs can it be used on the Depreciation Input page and if so is there any math involved in order to get the right input? Also, I'm still unclear about what dollar amount goes in "Section 179 deduction" Is it cost - % AND (last question) if 6 months in service instead of a full year make a difference in overall calculations? Whew😤 sorry in advance!
Hi Gretta, are depreciation calculations involved. I would suggest checking out publication 946 and there a few depreciation calculators online. goodcalculators.com/car-depreciation-calculator/ 2. Section 179 input is typically limited if the vehicle is under 6,000 lbs. The max 179 amount would be found in publication 946 as well. I can't remember the amount off the top of my head but I believe it is around $11,000. 3. If 179 section less than the total cost of the car. Say the car costs $30,000. You take 179 of $10,000 the remaining $20,000 is depreciated over 5 years. The month in service would matter because you begin depreciation from the date placed in service. So if you place in service in May for example you would only get 8 months of depreciation the first year. Hope that helps. Wish I could explain in further detail, but I would literally have to write a book. Best of luck.
So I'm going to sound a bit dumb but what does a mini van fall under? (Cars or Trucks & Vans)I'm specifically looking at the chrysler pacifica hybrid (7 passenger, 6300 gvwr)
Not a dumb question at all. I honestly don't think the 946 publication clarifies what types of vans they mean. nonetheless i think you can justify it to fall under trucks and vans. However, I would read to see what the publication says to be on the safe side and for educational purposes. I don't think they limit it to cargo vans.
I bought my car in 2019 for business. I was doing Lyft, now I do deliveries so is there no way at all that I can write off some of the expenses for this vehicle?
What if I bought my vehicle before I started my gig job. But, it's was still purchased within that year's time. Basically, the vehicle was purchased in November 2019, but started gig working in August of 2020. Does section 179 still apply?
So if you go to a dealership.. do you get the 25k right off the price with a 179 or do you pay everything yourself over a regular loan and at the end of the year get money when you do your taxes?
Sergio, fantastic question. A trailer is actually considered a separate piece of equipment and therefore would not be included when determining the gross vehicle weight.
Mike question, so I have two rentals but they are not under an llc, now I go do all the maintenance and repairs so my question is would I be able to buy a truck and take the deduction I do claim my 1099 and also any money made from the real estate. So can I still take this tax deduction or do I have to be in an llc I am located in Texas.
Hi Alvaro, an LLC would not be required. However, you would need to choose whether you will take standard mileage or depreciation as you can only take one or the other, but not both. Plus you will need to specify a personal use portion vs business use.
Mike, thank you for the informative videos. Question: I'm a business owner and I'm planning on buying a new truck (Cost $80K GVW 6000+ short bed) It will be used 100% for business. I have another vehicle for personal use. My question - what would my maximum deduction be in my scenario and do I still need to keep a mileage log? Even though its used 100% business, the annual mileage will be low. Could this cause a potential audit? Thank you again!
Whatever it costs for one year, basically if it's an 80k truck, that's an 80k write off. RUclipsrs do this all the time, if they know taxes are going to be 60-70k they'll buy a 60-70k car for the write off, The car will be used to make business content for their channels. This is why they do house reveals and everything like that. The youtubers video nearly every day, so as long as they have proof of recording content for their channel, even if not uploaded it counts during an Audit. This is why Donald Trump pays literally only a few thousand in taxes a year. His entire life "revovles" around his business. He eats, business meeting. He takes a flight? Company flight. He goes golfing? Business meeting. He spends 200 million on business? Company use write off. The list goes on. Like owner operator truckers, they generate 200k a year, gas 25% write off, vehicle payments $1,000 per week? 52k write off. They keep receipts for business computers, business vehicle to work, open an LLC, rents a write off because Home Office, business clothes/shoes/gloves. My friend only made 18k last year after all of his "expenses" on $225,000. It's how the games played.
Hi Ryan, good question. You do not, but from an accounting standpoint if you purchase the vehicle personally you will want to contribute it to the business in order to make a business related purchase. Or have the business reimburse you for vehicle. There are a few ways to go about it, but those are two examples.
I have a question it’s a bit complicated but maybe simple two parts. So if I own a business and work another job full time using the car for work. But also using work to talk to people about my business handing out my cards flyers and company info can I use those miles as business related
Hi Demarco, good question. based on the facts and circumstances you are describing you would not be able to deduct those as business miles, because you are driving to those locations for the convenience of your employer. Best of luck with your side hustle.
Hi C200s, good questions. It depends, but if you bought it personally you could sale the car to the business, or contribute it to the business. There are many things you can do. However, from an accounting standpoint it is easier to have the business purchase the vehicle in my opinion if your ultimate goal is to use for business.
Hi Mike! Long time no see! A quick question: I sold my car today and it was a lease I bought out. I used it for driving Uber. I bought the lease out because I had put so many miles on the car. When I sold it today it had 170,000 miles on it! I intend to get another car to drive the heck out of again, but I’m wondering if I should get a pre-owned car this time or another lease. I know it will cost less overall to get a pre owned car. I’m used to writing off vehicle expenses for the Uber job. If I get a pre owned it will cost less but will I be able to write off what I pay for the car the same way I did for a lease? ie downpayment and monthly finance payments or do I have to be a registered business to write those Payments off with a non leased car? Or since the GVW of the car I will buy is under 6,000 lbs should I just lease instead in order to utilize the write off? Would I have to create a driving business like “Tyler’s Rides”? Thx!
Hi Tyler, good questions. For vehicles you can deduct "Actual expenses" Which includes depreciation or take the standard business mileage deduction. Mileage deduction is typically more advantageous for Uber drivers from what I've seen in general. Important to note: you cannot take mileage and depreciation at the same time, you have to choose one or the other. If your vehicle is under 6,000 pounds it would not disqualify you from taking 179. You would just get a reduced amount and the rest of the cost would be depreciated over 5 years. Car payments are not deductible, but you would get the deduction through depreciation. The interest you pay on the vehicle financing though is deductible. Lease expenses are deductible. From a personal financial standpoint I don't believe in leasing. For business purposes it may be justified, but if you can own the vehicle outright I think that would be best in my opinion. Remember your deduction of actual expenses are limited to how much you use to the vehicle for business. So if you only use for uber 50% of the time you only depreciate half of the cost of hte vehicle. The rest would be considered a personal expense and therefore non-deductible.
I'm getting a better interest rate if I finance and buy as personal auto loan instead of business loans. Can I still use 179 for Tesla X which is 6k lbs in 2020. I have a LLC S Corp. Thanks
Hi Google, in order to depreciate the vehicle if you took out a personal loan you would need to contribute the vehicle to the business as a capital contribution. There are a few more steps but it is possible. However, if you hold the loan personally the interest would not be deductible. It would be deductible if the loan was held by the business. Something to think about.
@@MoneyandLifeTV so I can still use 179 except I can't deduct the interest which is fine because it is not that much anyway. Also do you mind sharing those extra steps that you mentioned. Thanks for your response!
Things such as: The accounting piece of it, documentation of you transferring the vehicle to the business, setting up on fixed schedule, etc. Hope that helps. If you have further questions it is probably wise to seek out a CPA where you live so they can assist you further.
Thank you for the video. Question: When you were mentioning the exceptions at 10:50 what do you mean by loaded? I was looking into buying a Toyota Tacoma but the GVW is 5,600 lbs. I could add racks to add more weight permanently but would it still be possible to qualify for the $25,000 deduction if I get the truck as is (5,600 lbs) and have bags of concrete in the bed?
Hi Christofer, great question. Technically the GVW would need to be above 6,000 without being loaded. If you added the racks to the truck than that woud likely accomplish that. If you do not meet the 6,000 GVW you still get to depreciate the vehicle over 5 years you just won't be able to get as much accelerated depreciation the first year. Hope that helps.
@@MoneyandLifeTV Hello again, A follow up question as an example- If I have an income of $100,000.00 at the end of the year and I want to buy a vehicle worth $30,000.00. Let's say I pay it cash, then instead of owing the IRS $30,000.00 I would owe about $17,000.00 in taxes plus the $30,000.00 vehicle expense which is a large amount of money. Would you suggest financing the vehicle over 5 years instead? Or perhaps leasing? I do need to buy a vehicle for business use but to try and pay it off the first year is a little ambitious. Hope this made sense. If you have an email where I can reach out, please let me know. Thank you
@@christofermireles8919 This could be misunderstood based on your question of employment, time of purchase and time of capturing the complete 5yr write-off. If you worked for someone and before end of year purchased a vehicle with cash it could bring down your taxable bracket to pay 17k in overall YTD taxes after your received refund. Your question could make sense. But, to add that into the purchase of the 30k vehicle could make the math look backwards (-47k versus -30k)from a homeowner stand. This IRS Code 179 may benefit business owners with write-offs more than homeowners with cash to spend. Plus the company can continue to write off the vehicle for the next 4 yrs.
I purchased a 2012 chevy cruze for Uber at the beginning of the year. It cost like 7400 sticker and i think final cost after taxes and financing was about 8900. I bought it in January and paid it in full in March, drove it 44k miles for the year, probably 98% business use. Own another vehicle for personal use. Would I use this 179 thing, the standard mileage deduction, or is there something else I would do that would be more beneficial for tax purposes. I heard you can write off vehicle purchases that are used for business but I dont know if that is different than what you are describing here and if they are different which one would be a better deduction
hey sir. i am an uber/lyft driver and i am trying to do my taxes. the question they ask is "enter the section 179 deduction you took at the time. You will find the amount located on the first page of depreciation and amortization in your tax return for the year you started using the vehicle for business" any help? i have an 2014 dodge journey. price of car when i brought it 32,000
Hi John sorry can't help with this one. I would have to see the tax return, depreciation schedule etc to provide a guidance. You might consider having a CPA review your tax return before you file if you are unsure. Sure it will cost money, but at least you will know it is correct. Not sure if you are using tax software but I highly recommend using tax software. If you use Turbo tax or H&R block I believe you can contact someone and they can help guide you on screen. That is probably what I would suggest in your situation. I would think that would be even cheaper than consulting with a CPA.
Free downloadable Handout and More: www.dropbox.com/s/xicffrcy2s8y3s0/179%20vehicles.docx?dl=0
Our Complete Tax Video Library Can Be Found Here:
ruclips.net/video/-O1SWSdWTGE/видео.html
Section 179 Explained: ruclips.net/video/y8fvXw7xTnE/видео.html
Where to find more information on depreciation?
Publication 946 is your friend: www.irs.gov/pub/irs-prior/p946--2018.pdf
Publication 463: www.irs.gov/pub/irs-pdf/p463.pdf
Time stamps so you can jump to any point in the video at any time.
0:53 When does 179 apply for vehicles?
1:51 Determining business use for personal use
3:03 Why Gross Vehicle Weight Matters
4:00 Example of how section 179 works
5:07 What is Section 280-F?
9:39 Vehicle weight ranges for tax deductions
11:40 When no section 179 limits apply
Do I need a business license in order to apply for this section , I don't remember the section number, I belive was 179 section, example if I wish to use my vehicle, for uber or taxi business, I don't have business license, but at the same time I want to buy and use a car for business, so once again to resume, do I need a business license in order to apply for a vehicle deduction, and if using my future car for uber will count as using the vehicle for business.
Good morning internet! This video is long over due. Tax time will be approaching in the next few months so this video will help you get prepared if you are a business owner or thinking of becoming a business owner. To support the channel CRUSH that like button, share this with a friend or comment below. Thanks for the continued support RUclips fam. Nearly 30,000 people in this community now.
Can u write of the depreciation of a used car
Thank you for posting this video, I took a 18100$ deduction for the federal tax and it help me but it increased my taxable income for the state and I have to pay a lot back on the state.
thanks for clarifying that you werent fat shaming my vehicle. really got upset there for a minute!
So let’s say you want the car 100% written off but you only use it 50% for business, is there anyway you get caught?
Thanks -- you answered my 2 main questions... #1 how much % of the time can be for personal vs business, and #2 when can you use 179. So, after watching this I went and talked to my wife about section 280f, and she wasn't impressed! I mean, really, she isn't even impressed with my awesome spreadsheets I create! Some people!
Haha your comment actually speaks volumes GenEx. I know exactly what you mean about people not valuing what you do.Taxes and finances can be so complex that people do no understand the value of they are receiving, because they simply don't understand how difficult it is to get this info for free. I knew when I published this particular video it probably wouldn't get that many views. During tax season though I think people will find this helpful.
You can give away so much for free, but so many people won't value it. My tax videos I consider to be my highest value content, because you cannot simply find this information for free. Find for free and understanding it, and knowing the most "current" law is very hard to do unless you work in the profession. I'm sure most people value what you do, but there always be those who don't, and we don't worry about them.
People love get rich quick videos, and entertainment videos, but the real value is found in technical videos. That is where the real learning is at. I could do "reaction" videos, but I believe in actually teaching something useful.
@@MoneyandLifeTV Haha, so true. My favorite video you did was actually the one where you showed how you set up your tax spreadsheet for your RUclips channel's business income & expenses :) Though it probably didn't get you the most ad revenue...
ahh glad to hear it. You will be pleased to hear I will be showing how to fill your tax forms for YouTub. Step by step :) Stuff I probably shouldn't give away for free, but ah what the hell lol. That video will come towards end of this year or beginning of next year.
@@MoneyandLifeTV Awesome, thanks, I appreciate you doing that :)
Thank you for sharing your knowledge. I found your videos are very educational and informative. I am an accountant too but I don’t do much taxes staff, your videos keep posted on current taxes rules. Keep up with these good videos!!!
My pleasure Yang, thanks for commenting. Are you in Audit? Creating these tax videos helps me remember all the rules. Sometimes I go back to re-watch them to refresh my own memory.
Excellent topic, I new nothing about this until reading a book about selling. Now, I might be wrong but are those deductions of 18,000, 10,000, 16,000 and 9,600 only if you use the vehicle 100% for business
Thanks for the info. Just remember that your revenue needs to be high enough to offset the deduction. In this economy, cash flow is key and cash will remain king for the foreseeable future. Buying a high cost asset just for the deduction isn’t a prudent move.
Well put Mike, totally agree!
cash isn't king, cash-flow is king... says grant cardone
So writing off a 100k truck opposed to paying 30%-50% in taxes isn't prudent based on a future liability? Or are you referring to throwing the extra money into a future asset without the liability?
I retired in Aug 2017 and took a sales/consulting position with another company. 2017 tax bill was close to even. For 2018 I paid in about $400 writing off mostly miles and a few things I bought for my home office. This past year(2019) I started consulting for a business and my sales went up also. My tax bill for last year is going to be 4k. I may need to buy a truck? This is what brought me here.
Can you do a video on how to fill out section 179 with bonus depreciation?
WISH i KNEW ABOUT THIS EARLIER WHEN WE PURCHASED YEARS AGO
At least you know now and for the future :) Thanks for watching.
Great informative video! I have a question though, regarding a 'vehicle for hire.'
I run a limo business, and after purchasing a limo a couple years ago, I wanted to take depreciation on it. So, as I'm trying to figure out the proper basis, method, etc., I have a quandary:
In Pub.946, at Ch. 5, "Additional Rules for Listed Property," under the section, "what is listed property?" it describes various things that ARE listed property... which of course, includes passenger vehicles. BUT, it says the following is EXCLUDED from the definition of 'Passenger Vehicle':
"A vehicle used directly in the trade or business of transporting persons or property for pay or hire."
So, OK, Fine... BUT, just the next Paragraph: "Other Property Used for Transportation", it says that while vehicles used for hire (which is exactly what my limo is for--even though it is a regular sedan), are not considered "Passenger Vehicles," but instead, ARE considered "Other Vehicles Used for Transportation."
What I cannot understand is, what is the difference? What does the qualification 'Other Vehicles Used for Transportation' GET me? Am I permitted to take a full write-off under 179? My limo is used 100% for booked limo runs, but it's not at all clear in the Publication, as nothing is said AFTER the heading, except to mention which vehicles are excluded from the definition (Note: I'm aware that I can't for this vehicle, as I bought it 2 years earlier, but would like to know for future reference)
My understanding is, it means I must itemize all costs (no std. mileage rate for commercial vehicles--and mine is), but I CAN depreciate 100% in the 1st year. I am ALLOWED to choose to do that OR, can still go ahead and do a 5-year depreciation. My particular choice IS to do a 5-yr depr. using GDS, Straight Line, Half Year convention. I just don't know if any of the 'definition' given under the "What is Listed Property" precludes me from using that method to depreciate my limo over 5 years.
Thoughts?
Thanks!
Hi Dean, good questions. Unfortunately I do not know the answer off the top of my head without doing actual tax research. If you want to be conservative tax wise I would lean towards taking the 5 year method. You can probably still take 179 to some degree. I would suggest also researching further on google, and IRS website. Also consider consulting with an accountant who has experience working with businesses similar to yours. You will want to consider your all over tax situation. If you expect your income to be higher in the coming years having that depreciation available spread over 5 years may help "Normalize" the tax hit. It would be a shame to take all the depreciation in the first year if income is low or at a lost due to the circumstances of Co-vid. Something to consider.
great job explaining all these crazy rules out
Could you make a new updated 2024 version if you have time? Doordash and grubhub more drivers then ever. Curious if a low cost vehicle could be a tax advantage in some form or fashion
Excellent video, looking forward to the Bonus one.
I have thought for a long-time about doing a video on bonus depreciation. I will make a few more videos for tax deductions for vehicles though regardless. Lots of deductions at play, and lots of rules. I love bonus depreciation though. Use it quite often for my clients.
@@MoneyandLifeTV thanks, I'm looking forward to understanding it.
Thank you. I will need this in a few years.
Glad it was helpful!
Nice video!! One day will you please consider covering one on vehicle Depreciation with actual expenses method. I really think your lives stream are helpful and intuitive thanks for all you do!!
Christian how's it going man? I certainly will plan to do a video on depreciation with actual expenses at some point. Perhaps around the time of next tax season. Lots of weird/complicated rules around car expense deductions so I try to break this stuff out in one vid at a time so it is digestible. Thanks for the topic suggestion!
Thanks great video!
Wow!! Thank you for this information!
Iggy, my pleasure brother, thanks for commenting.
Its almost the end of the year... Maybe a last minute TAX review for 2019. ( 457, 401k, Roth etc)
ruclips.net/video/-O1SWSdWTGE/видео.html
Very good information. Thanks
Thank you Brayan!
Nice informative video. I would love to see a video on the pros and cons of purchasing, financing or leasing the section 179 vehicle. For example - if leasing, what happens when your lease ends?
Thanks for the topic suggestion. I think with leases and taxes the lease agreement terms holds a lot of weight in terms of how the transaction may play out from a tax perspective.
@@MoneyandLifeTV interesting. Leasing seems attractive because usually the initial outlay is low, and the payments are lower too. I've read that you can still take the deduction even if it's a lease. I'm just confused on how that plays out when your lease comes to an end.
I think it depends on whether is is an operating lease or capital lease. I think if you research those terms it will shed further light on your question.
Do you need to be an LLC to do this or can also do as a sole proprietor?
Thank you
Can you tell us, your subscribers on how to calculate depreciation on a business vehicle? Thanks and greatly appreciate it everything on your RUclips, very helpful.
Hi Lin, thanks for the suggestion. Depreciation is very complex, but perhaps I can find a good depreciation calculator for viewers to use to calculate depreciation. I have yet to come across a good excel doc to help calculate it. But just FYI if you are using straight line depreciation you would depreciate a vehicle over a total of 5 years. each month you get 1/60 of the depreciation. In a nut shell that is how it works. I would suggest googling "depreciation calculator" and see what comes up. Its not perfect, but will probably serve your purpose. Honestly even if your depreciation calculations are slightly off the IRS probably will not care as long as you in the ball park. That is what an IRS auditor told me.
Best video about depreciation and the 179 deduction i have seen. Thank you. quick question, what happen if you fail or let said you loses your mileage records. can you still or not get that deduction if you do not know the exact amount of mileages?
Hello thanks for the information. I was wondering what if you purchased more than one vehicle in a year and you wanting to depreciate over the five-year period so how does that work even though you’re only up to $10,000 per year
What if I buy a car and wrap it in vinyl with my companies logo. Would that be considered using it for business 100% of the time because I am using it for advertising?
James I like the way you think. Unfortunately that would not suffice as 100% business use. However, it doesn't mean you can't make money from advertising :)
@@MoneyandLifeTV 1:21 If you apply this rule, it appears that you can take the business write-off, as your explanation clearly indicates.
@@MoneyandLifeTV Could you Elaborate, in terms of "making money" from advertising
Since you purchased the vehicle for business use, it is already an assumption that you will use it a 100% of the time for business. However, if you use it for anything else, you've used it a faction of that time.
Very well explained 🙏👌thank you
Thanks Ankita, I really appreciate your feedback as it took me quite awhile to figure out how to present this information in a way that people could understand.
So you can’t write off the whole vehicle if its less than 6k lbs
Alaska sighting ! Thanks for the advice
You bet! Thank you Thomas!
thanks for the video very helpful, have a question if I have 2 vehicles and use both for business, can I use different methods for deduction 1st one with standard milage and the second one with actual expenses with depreciation and using the 179 section. thanks
Excellent content! I have a couple questions, I have a rental property bringing in around 14k a year and opened an LLC and putting the business as property management. I plan on purchasing a tesla model 3 and also using it to uber. Are these side hustles eligible for the 280F eductions granted I use my vehicle 50%+ of the time?
Great Video. Just Liked and Subscribed.
Thank you I will continue to produce more tax related videos throughout the year.
You are amazing thank you !!!
My pleasure April. Just sharing some knowledge is all.
I have two cars I use 80% for business and the cost down pay for the cars was 118,000.
My individual car weighs less than 6000 pounds . Please help me with how much I can deducted max in first year
Good explanation, thank you!
Soooo if I have a car youtube channel and am constantly recording using the built in cameras and making videos with and about the car... would that count as over 50%? haha...
I want to buy a car for my LLC. However, I don't need big SUV over 6000lb. Can I buy a compact SUV (less than 6000 lb) and get buying depreciation for first year?
Great explanation. I had a question I'm hoping you can answer. I have a vehicle that I currently use for business and personal use (though I've never claimed section 179, only claimed millage that I drive). I don't owe any money on this vehicle and it's currently worth around $13,000 trade in. I'm looking at a vehicle that would cost about $25,000 so the difference I would have to pay would be around $12,000 if I traded in my current vehicle. So in that scenario would my purchase price be $12,000? Or does the trade in count as $13,000 cash? On other words, could I claim up to the full $18,000 for a qualifying vehicle even though the only real money out of pocket was $12,000? The second question I had is If I financed that $12,000 difference could I still claim the deduction? Normally I wouldn't finance, but given that the rates are at 0% because of the pandemic, It doesn't hurt to have a little extra cash in the bank if I don't have to pay any interest.
Hi Cameron great questions. To answer your 1st question $25,000 would be the cost of the new vehicle. The trade in is treated like additional cash. If this were a like kind exchange my answer may be different. The amount of 179 you can take depends on how much you are going to use it for business, vehicle weight, etc. At a minimum you could probably deduct $3,000 - 11,000 in the first year. Possibly $18,000 if it meets all of the tests for the max 179 deduction.
Second question. Financing has no impact on section 179. However, the interest on the loan may be deductible to the extent you use it for business.
Hope that helps.
What’s the best way to use for dedications when you using your car for Uber and Lyft
You can use mileage or actual expenses such as (Depreciation, repairs, license fees, etc.) That best advice though that I can offer is to keep detailed mileage logs. Most people fail to do this. Keep a separate of books for your Uber and lyft business, and all associated expenses. In theory anything you do specifically for a "Business related purpose" (and not for personal use) can become a deduction. Just be wise about how you spend your money. Never spend money just for a tax deduction. Only spend money if you actually need something for your business.
AWESOME VIDEO
Thanks Angelica!
What about a suv weighing 5k, could it be loaded with 1,050 pounds to bump it up to the over 6000 for the 25k limit? I'm not sure how you would estimate how much would be the fully loaded load limit. You said truck or van, not suv. So I'm wondering can I claim the 25 deduction for a fully loaded suv weighing 6,000 pound or more.
Unfortunately not, the GVW has to be 6,000 lbs without any load. You can still take a sizable deduction just not the full amount in the first year.
if vehicle used less than 50% and using depreciation, will the depreciation be eventually fully used in future years.
Good question John, the cost basis used for depreciation would be limited to % used. Thus at most you would only depreciate 50% of the cost basis.
What if I bough the truck exclusively for work, but I don’t own my own business? Could I still claim this?
When you say ”when a vehicle is put in place” does that mean that the car has to be new?? I’m looking at a used car and wonder if I can do this. So hard to find this info, happy for any help.
Based on mileage and vehicle weight qualification. So business usage means from point A of business to point B of conduct of business. Now there are room for rest stop, if your home happened to situated in the middle of the trip? A vehicle when parked could also be exploited for a personal usage like a rockstar DHL/FedEx delivery van??
But then you could not take the business seriously. It has to be parked at the office? Journeyman? Tribal prentice? Wth is that??
Great question. You could rest stops. As long as majority of the miles are for business or in the due course of business you won't have any issues. If you are between trips from point A to point C and you stop at point B for a quick break I would still count that as business. As long as you are true to your intentions you should be good.
So I do a few side jobs, licensed real estate agent and landscaping. When I buy a truck for over 50% business use, do I have to be operating as an LLC? Can the vehicle be purchased in my name? I have heard dealerships requiring information to prove your a business owner. Any comments is appreciated.
Great Video!
QUESTION 1: When you finance a vehicle, can you still input your down payment in expenses and still depreciate
QUESTION 2: Do you still expense your monthly loan payment after doing the above
Hi Linda, great questions. Since depreciation already factors in the "total cost" of the vehicle you would not be able to deduct your down payment as well, because you essentially be getting a double deduction. For your second question the answer would be "No" but you can deduct any interest expense you pay on the vehicle loan. All of this of course assumes the vehicle is used for business purposes. If not used 100% for business deductions start to become limited. to the business use percentage.
So in 2020 i plan on creating an LLC and getting my license number to start taxing my income from my wood working but i have some questions. I'll still be working my normal job which i earn around 50k and my wood working buisness i only made 8k last year. My wood working was a hobbie that is starting to become bigger. I do not pay tax on it but i'm assuming i should start? Also i was looking at buying a new truck to help with the hauling and selling my car. If i buy a new truck that is 50-60k and i'm making less than 10k a year at the moment with my wood working that by then will have an LLC how would Section 179 work for me? can i still write off my truck if i'm earning less than 10k a year? I'll be using it around 75% of the time for my buisness and using it to get me to my normal job and back. I'm not trying to do anything wrong i just want to make sure i'm doing everything right.
Hi Gazz, good questions. It is smart of you to ask. If your wood working is becoming a business than you will want to start filing taxes for this income. Remember you can offset your business income with any applicable business expenses you incurred. In terms of the truck purchase I would advise against taking 179 or bonus depreciation if you do not expect to have a lot of income from the business. I say this because a large loss can make you a target for a potential audit. Your chance of that happen is low, but still something to watch out for you. Honestly in your situation I wouldn't want to deduct all the first year. That deduction is better served in my opinion once your income goes up. You want those expenses to offset your business income when you are in a higher tax bracket, not when you are in a low one with hardly income. Instead of a $1 deduction saving you 12% in tax it would be more productive if that $1 was saving you like 24% or 22% in tax. Therefore I probably would not recommend taking accelerated depreciation based on the facts you are providing, but that is your call. Losses can carryforward to be used in future years. There's more to it than that, but those are some of things I think you should think about. Hope that helps.
Nice video. I always wondered what “limits applied” when selecting a depreciation method on my firms software
Hi DJ great question. With software it is a bit more straight forward. In most circumstances software is amortized/depreciated over a 3 year period or 36 months using the straight line deprecation method. I don't know off the top of my head, but it may be eligible for 179 depreciation as well meaning you could probably write off the costs in full during the first year.
Very very informative video!! Quick question: So currently I work for instacart and I plan do to the standard mileage deduction as a write off. What else can I write off working as a instacart shopper? I recently financed my car, still paying it off, and I literally use this car for work only. I work everyday of the week. I would say 90% work/ 10% personal use. How can I use this to maximize my tax write offs?
Good information!
Thank you!
Hello Mike i am planning to buy a vehicle mainly to rent in Turo.
Lets say Vehicle price is $60k with 6k GVW above. My monthly payments will be $1000/ month or $12k a year for next 5 years and from Turo i am expecting $7k a year for the next 5 years as income.
With these numbers what is the max i can deduct using sec 179 and bonus depreciation? Can i depreciate $18k,$16k,$9.6k,$5.7k each year even though i am only making $7k a year (is there any minimum amount we need to make from business to qualify the full depreciation amount?) Thank you for your time.
Hi I brought a car in 2014 ( 6000lbs) and I use this car for business purpose only 100% . How much can I deduct on 2022 taxes
Does section 179 limits apply to used vehicles also. Thanks for this information😊
Yes they do :) My pleasure.
I’m having a hard time understanding. So when people say “I’m writing off the car” the person claims the full 18,200. Does the irs send a check to pay the vehicle?? Might be a stupid question.
Great question actually. Typically they write off as much as they can the first year which is around 18K for most vehicles. Sometimes it less depending on the business use of the vehicle and the type of the vehicle. Generally though most businesses (with a few exceptions) cannot write off the entire vehicle in the first year. Typically the first year write off is 11k-18k The IRS does not send a check. All of the activity is reported on that person's tax return and the vehicle deduction will lower there overall business income, thus lowering their taxable income.
Will you get a refund for 18200 deduction?
Thanks for explaining. This helps a lot!
Thanks Eann, I have at least one or two more vehicle and tax deduction videos up my sleeve over the next few months.
I have my own business a rental property and full time job. Do these incomes get filed together? What's the best way to go forward?
Hi I just talk to hr block, the lady confused me... If I buy a car over 6,000 pounds I'm a sole proprietorship, say I paid $80k, & don't owe the irs and I use 179 accelerated depreciation within the first year, when I file my taxes will I get the full 80k back returned into my account?
Hi Candance great question. If you get an $80,000 deduction you will not necessarily get $80,000 back. If the deduction wipes out your tax liability your refund will be just whatever you paid in through estimates and withholdings throughout the year. You can only get back what you paid in. If you end up having an excess loss it will often carry forward into a future year until you have more taxable income to deduct it against. However, with section 179 you can only accelerate depreciation to the extent of your business income. In other words you cannot make your overall income go negative with section 179. So the short answer is no, hope that helps.
Is there an exclusion for a luxury vehicle such as the model x?
Also when you buy the vehicle do you have to register it under the business or the name?
My wife works for shipt part time delivering groceries. The miles deduction eliminates taxes on the job.
Nice! The mileage deduction adds up fast.
Does this only apply when the full purchase price of the vehicle is paid up Front or does it also apply when the vehicle was purchased with a loan? This video was a great help thank you very much!
Hi Andy, great question. Good news is whether you pay cash or take a loan to finance the vehicle it won't matter in terms of taking accelerated depreciation.
@@MoneyandLifeTV can I do both ? Mileage and 179?
If I owe 5,000 in taxes and I buy a car for business and spend 5,000 and use that under section 179. Does that mean I owe $0 ?
Thanks for the video! One question - how does this work if you finance a vehicle - for example - if you finance a $30,000 vehicle and only put $5,000 down, can you still take the $10,000 179 deduction?
Hi Alex wonderful question that many people ask. Yes, financing a vehicle does not prevent you from taking 179. Just know that it will depreciate the value of the vehicle quicker. If you sale the vehicle later on there is a chance you will have to recognize part of the income on the sale at that point. This is known as "1245 recapture." Just something to be mindful of. Hope that helps.
Do you have a follow up video about the “bonuses?”
Hi there. I'm a higher income earner on a W2. My wife and I own an LLC that we started this year. I've found a nice cargo van that I can place into service for our LLC. Can I use the 179 depreciation to help offset the tax liability of my W2 income since the LLC is considered pass through income? I realize it would be unusual to to claim a $25k expense on an LLC that only has a few months left in 2020 to earn. We're at 0 so far for earned income for the LLC
So I have a question. A van is mentioned, but my thought is starting a mobile unit in an RV for health therapies. How does this apply regarding deductions? thanks
Hi Woodbe, good question. One I don't know the exact answer to. In that instance the vehicle is being used primarily as "equipment" in a sense vs normal vehicle usage. You can check IRS publication 946 www.irs.gov/pub/irs-pdf/p946.pdf . I suspect an RV for therapies would not be depreciated like a normal vehicle, but I could be wrong.
Nice video. Are there any issues with deductions for a vehicle that costs exceed that years business earnings for that year?
Hi Jousha, yes, you may find the deductions are limited to income depending upon the type of expense. Section 179 for example is limited to business income.
Say you bought a vehicle with a loan, in this case you can't deduct 100% in year 1 because I didn't pay off the vehicle. So the best I can do is use bonus depreciation or just regular depreciation?
Hi Code, the loan itself has no affect one way or another on the use of bonus. In some circumstances you may take full 100% bonus, but it just depends. Please review IRS publication 946 for further instructions.
@@MoneyandLifeTV I’m trying figure out if I finance a truck for my business can I write off the vehicle 100% or just the payments?
If I used section 179 this year (for a $25,000 deduction of $43,000 Toyota Tundra short bed,) and sell my business next year, and plan to keep said vehicle after the sale, do I have to pay the section 179 deduction back?
Can you write off personal vehicle modifications if it includes company branding (e.g. a car wrap)? So even though you would be using it for personal trips every time you would drive it the outward branding of the car count? Any reply would be greatly appreciated
I always thought you can write the full price off the first year.
Hi Austin, no sir not always :)
@@MoneyandLifeTV I got a question, I bought my business car before I got my LLC approved will I still be able to write it off?
Does the car have to be financed/titled in the business’ name?
Thanks for asking scott, no it does not. You can buy it personally and contribute the car as a capital contribution to the business. That is if you want to depreciate it If you want to take the mileage deduction than you would not depreciate the vehicle. You could also setup a note due to shareholder to have the business pay you back for the vehicle.
Thank you for all your help. This is a 2 or 4 parter: first off, if the vehicle weighs less then 6000lbs can it be used on the Depreciation Input page and if so is there any math involved in order to get the right input? Also, I'm still unclear about what dollar amount goes in "Section 179 deduction" Is it cost - % AND (last question) if 6 months in service instead of a full year make a difference in overall calculations? Whew😤 sorry in advance!
Hi Gretta, are depreciation calculations involved. I would suggest checking out publication 946 and there a few depreciation calculators online. goodcalculators.com/car-depreciation-calculator/
2. Section 179 input is typically limited if the vehicle is under 6,000 lbs. The max 179 amount would be found in publication 946 as well. I can't remember the amount off the top of my head but I believe it is around $11,000.
3. If 179 section less than the total cost of the car. Say the car costs $30,000. You take 179 of $10,000 the remaining $20,000 is depreciated over 5 years. The month in service would matter because you begin depreciation from the date placed in service. So if you place in service in May for example you would only get 8 months of depreciation the first year. Hope that helps. Wish I could explain in further detail, but I would literally have to write a book. Best of luck.
@@MoneyandLifeTV thank you, you're awesome👍🏽👍🏽I'm just gonna keep reading your reply until I get it.. lol😅
Haha, sorry I wish they made this stuff less complex, but it simply isn't written that way.
So I'm going to sound a bit dumb but what does a mini van fall under? (Cars or Trucks & Vans)I'm specifically looking at the chrysler pacifica hybrid (7 passenger, 6300 gvwr)
Not a dumb question at all. I honestly don't think the 946 publication clarifies what types of vans they mean. nonetheless i think you can justify it to fall under trucks and vans. However, I would read to see what the publication says to be on the safe side and for educational purposes. I don't think they limit it to cargo vans.
Can I use a section 179 on a used car from private market? Or a used car from dealership? Vehicle would be used for RUclips content.
Hello there, can this be applied if I decide to write off my taxes based on milage deduction? Reply would be much appreciated
I bought my car in 2019 for business. I was doing Lyft, now I do deliveries so is there no way at all that I can write off some of the expenses for this vehicle?
Does car have to be purchased or financed in business name? Or can it be purchased or financed in your personal name?
What if I bought my vehicle before I started my gig job. But, it's was still purchased within that year's time. Basically, the vehicle was purchased in November 2019, but started gig working in August of 2020. Does section 179 still apply?
So if you go to a dealership.. do you get the 25k right off the price with a 179 or do you pay everything yourself over a regular loan and at the end of the year get money when you do your taxes?
What about hauling a trailer? Will that be included in the loaded weight? We haul a trailer with our tools and materials at times
Sergio, fantastic question. A trailer is actually considered a separate piece of equipment and therefore would not be included when determining the gross vehicle weight.
not allllllll states would qualify for bonus depreciation. Check your state
Mike question, so I have two rentals but they are not under an llc, now I go do all the maintenance and repairs so my question is would I be able to buy a truck and take the deduction I do claim my 1099 and also any money made from the real estate. So can I still take this tax deduction or do I have to be in an llc I am located in Texas.
Hi Alvaro, an LLC would not be required. However, you would need to choose whether you will take standard mileage or depreciation as you can only take one or the other, but not both. Plus you will need to specify a personal use portion vs business use.
when you buy a vehicle for your company, can it be for buying a used car or does it have to be a new car?
Mike, thank you for the informative videos. Question: I'm a business owner and I'm planning on buying a new truck (Cost $80K GVW 6000+ short bed) It will be used 100% for business. I have another vehicle for personal use.
My question - what would my maximum deduction be in my scenario and do I still need to keep a mileage log? Even though its used 100% business, the annual mileage will be low. Could this cause a potential audit? Thank you again!
Whatever it costs for one year, basically if it's an 80k truck, that's an 80k write off.
RUclipsrs do this all the time, if they know taxes are going to be 60-70k they'll buy a 60-70k car for the write off, The car will be used to make business content for their channels.
This is why they do house reveals and everything like that.
The youtubers video nearly every day, so as long as they have proof of recording content for their channel, even if not uploaded it counts during an Audit.
This is why Donald Trump pays literally only a few thousand in taxes a year. His entire life "revovles" around his business. He eats, business meeting. He takes a flight? Company flight. He goes golfing? Business meeting. He spends 200 million on business? Company use write off.
The list goes on.
Like owner operator truckers, they generate 200k a year, gas 25% write off, vehicle payments $1,000 per week? 52k write off.
They keep receipts for business computers, business vehicle to work, open an LLC, rents a write off because Home Office, business clothes/shoes/gloves.
My friend only made 18k last year after all of his "expenses" on $225,000.
It's how the games played.
Do you have to use your business account to purchase vehicle?
Hi Ryan, good question. You do not, but from an accounting standpoint if you purchase the vehicle personally you will want to contribute it to the business in order to make a business related purchase. Or have the business reimburse you for vehicle. There are a few ways to go about it, but those are two examples.
Can a use 179 for a taxi car less than 6000 lbs???
I have a question it’s a bit complicated but maybe simple two parts. So if I own a business and work another job full time using the car for work. But also using work to talk to people about my business handing out my cards flyers and company info can I use those miles as business related
Hi Demarco, good question. based on the facts and circumstances you are describing you would not be able to deduct those as business miles, because you are driving to those locations for the convenience of your employer. Best of luck with your side hustle.
So would i have to purchase a new vehicle, or would i be allowed to purchase a 2006 model?
Great question! Used vehicles work as well.
Do you have to buy the vehicle under the business name? Or you can buy it yourself use it for business and still get those deductions?
Hi C200s, good questions. It depends, but if you bought it personally you could sale the car to the business, or contribute it to the business. There are many things you can do. However, from an accounting standpoint it is easier to have the business purchase the vehicle in my opinion if your ultimate goal is to use for business.
Can someone buy a used vehicle and depreciate for 2 years and sell the vehicle?
Or does the vehicle need to be new
Or just new to the business?
Hi Mike!
Long time no see!
A quick question:
I sold my car today and it was a lease I bought out. I used it for driving Uber.
I bought the lease out because I had put so many miles on the car.
When I sold it today it had 170,000 miles on it!
I intend to get another car to drive the heck out of again, but I’m wondering if I should get a pre-owned car this time or another lease.
I know it will cost less overall to get a pre owned car.
I’m used to writing off vehicle expenses for the Uber job.
If I get a pre owned it will cost less but will I be able to write off what I pay for the car the same way I did for a lease?
ie downpayment and monthly finance payments or do I have to be a registered business to write those Payments off with a non leased car?
Or since the GVW of the car I will buy is under 6,000 lbs should I just lease instead in order to utilize the write off?
Would I have to create a driving business like “Tyler’s Rides”?
Thx!
Hi Tyler, good questions. For vehicles you can deduct "Actual expenses" Which includes depreciation or take the standard business mileage deduction. Mileage deduction is typically more advantageous for Uber drivers from what I've seen in general. Important to note: you cannot take mileage and depreciation at the same time, you have to choose one or the other. If your vehicle is under 6,000 pounds it would not disqualify you from taking 179. You would just get a reduced amount and the rest of the cost would be depreciated over 5 years. Car payments are not deductible, but you would get the deduction through depreciation. The interest you pay on the vehicle financing though is deductible. Lease expenses are deductible. From a personal financial standpoint I don't believe in leasing. For business purposes it may be justified, but if you can own the vehicle outright I think that would be best in my opinion. Remember your deduction of actual expenses are limited to how much you use to the vehicle for business. So if you only use for uber 50% of the time you only depreciate half of the cost of hte vehicle. The rest would be considered a personal expense and therefore non-deductible.
Thanks!
And where do I find the depreciation tables?
I’m considering buying a used car 2017 tomorrow and do used cars still hold depreciation?
I'm getting a better interest rate if I finance and buy as personal auto loan instead of business loans. Can I still use 179 for Tesla X which is 6k lbs in 2020. I have a LLC S Corp. Thanks
Hi Google, in order to depreciate the vehicle if you took out a personal loan you would need to contribute the vehicle to the business as a capital contribution. There are a few more steps but it is possible. However, if you hold the loan personally the interest would not be deductible. It would be deductible if the loan was held by the business. Something to think about.
@@MoneyandLifeTV so I can still use 179 except I can't deduct the interest which is fine because it is not that much anyway. Also do you mind sharing those extra steps that you mentioned. Thanks for your response!
Things such as: The accounting piece of it, documentation of you transferring the vehicle to the business, setting up on fixed schedule, etc. Hope that helps. If you have further questions it is probably wise to seek out a CPA where you live so they can assist you further.
@@MoneyandLifeTV I am planning to do a bill of sale to my business and will make payments from the business account.
Thank you for the video.
Question: When you were mentioning the exceptions at 10:50 what do you mean by loaded?
I was looking into buying a Toyota Tacoma but the GVW is 5,600 lbs. I could add racks to add more weight permanently but would it still be possible to qualify for the $25,000 deduction if I get the truck as is (5,600 lbs) and have bags of concrete in the bed?
Hi Christofer, great question. Technically the GVW would need to be above 6,000 without being loaded. If you added the racks to the truck than that woud likely accomplish that. If you do not meet the 6,000 GVW you still get to depreciate the vehicle over 5 years you just won't be able to get as much accelerated depreciation the first year. Hope that helps.
@@MoneyandLifeTV Hello again,
A follow up question as an example- If I have an income of $100,000.00 at the end of the year and I want to buy a vehicle worth $30,000.00. Let's say I pay it cash, then instead of owing the IRS $30,000.00 I would owe about $17,000.00 in taxes plus the $30,000.00 vehicle expense which is a large amount of money.
Would you suggest financing the vehicle over 5 years instead? Or perhaps leasing?
I do need to buy a vehicle for business use but to try and pay it off the first year is a little ambitious.
Hope this made sense. If you have an email where I can reach out, please let me know. Thank you
@@christofermireles8919 This could be misunderstood based on your question of employment, time of purchase and time of capturing the complete 5yr write-off. If you worked for someone and before end of year purchased a vehicle with cash it could bring down your taxable bracket to pay 17k in overall YTD taxes after your received refund. Your question could make sense. But, to add that into the purchase of the 30k vehicle could make the math look backwards (-47k versus -30k)from a homeowner stand. This IRS Code 179 may benefit business owners with write-offs more than homeowners with cash to spend. Plus the company can continue to write off the vehicle for the next 4 yrs.
Does this include vehicles you purchase private party as well?
Yes sir.
I purchased a 2012 chevy cruze for Uber at the beginning of the year. It cost like 7400 sticker and i think final cost after taxes and financing was about 8900. I bought it in January and paid it in full in March, drove it 44k miles for the year, probably 98% business use. Own another vehicle for personal use. Would I use this 179 thing, the standard mileage deduction, or is there something else I would do that would be more beneficial for tax purposes. I heard you can write off vehicle purchases that are used for business but I dont know if that is different than what you are describing here and if they are different which one would be a better deduction
Ride-hailing services don't qualify for 179.
hey sir. i am an uber/lyft driver and i am trying to do my taxes. the question they ask is
"enter the section 179 deduction you took at the time. You will find the amount located on the first page of depreciation and amortization in your tax return for the year you started using the vehicle for business" any help? i have an 2014 dodge journey. price of car when i brought it 32,000
Hi John sorry can't help with this one. I would have to see the tax return, depreciation schedule etc to provide a guidance. You might consider having a CPA review your tax return before you file if you are unsure. Sure it will cost money, but at least you will know it is correct. Not sure if you are using tax software but I highly recommend using tax software. If you use Turbo tax or H&R block I believe you can contact someone and they can help guide you on screen. That is probably what I would suggest in your situation. I would think that would be even cheaper than consulting with a CPA.
Money and Life TV thanks chief