Disadvantages of Writing Off Your Car in 2024 - Section 179
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- Опубликовано: 8 июн 2024
- The untold truth about writing of your vehicle, the vehicle tax deduction, and section 179 as a business. It may seem like a good idea to help you lower your taxes but there are a few things you need to know beforehand. In this video, I go over four reasons why you don't need to write off your car or vehicle.
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Timestamps:
Intro (0:00)
What is a Vehicle Tax Deduction? (0:27)
Reason #1 Why You Should Not Write Off Your Vehicle: (1:41)
Reason #2 Why You Should Not Write Off Your Vehicle: (3:02)
Reason #3 Why You Should Not Write Off Your Vehicle: (6:56)
Reason #4 Why You Should Not Write Off Your Vehicle: (8:38)
When you use a vehicle for business, it becomes a business asset which allows you to write off the expenses of that vehicle.
And there are two ways you can write off your car expenses:
With the Actual Expense method you can literally write off most of your actual car expenses.
This includes any repairs and maintenance, insurance payments, tires, tolls, car Insurance, windshield wiper fluid, and the depreciation of the vehicle.
With the Standard Mileage Method, the second way to write off your vehicle, you can write off all of the mileage related to your vehicle.
To get your allowable deduction you would just multiply the miles driven and the standard mileage rate.
I still think that the ability to write off your vehicle as a business and take a vehicle tax deduction is a powerful and beneficial way to lower you taxable income. Just make sure the write off is right for you!
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Disclaimer: The information provided in this video is for informational purposes only and is not meant to take the place of professional legal, accounting, or financial advice. If you have any legal questions about this video or the subjects discussed, or any other legal matter, you should consult with an attorney or tax professional in your jurisdiction (i.e. where you live).
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This is amazing. I couldn't agree more, the accounting youtube personalities NEVER talk about the downsides of 179/bonus depreciation, they just tell you to buy a car and take the deduction.
I've watched several videos on this and yours is easily the best one. You don't just regurgitate general info. Thank you sir!
Love the professionalism good brother. This information was well put together.
This was very helpful indeed, lots of clients asking for 100% write off and sending me videos and driving me nuts; this is the greatest video so far that I'm sending them in response to clear all their "too good to be true" thoughts. Thank you!! Don't stop!!
Great job with the information. I really appreciate you presenting the cons. Many people see this as an easy deduction, but they don't realize the corner they paint themselves into.
Nice video presentation. I like that You get right to the key points and relay the info well👍
Great video! This is valuable information that, as you said, others don’t bring out. The title is fair because is is a counterbalance to all the other videos that tell you how and why you should write it off. This highlights important reasons why it could be detrimental to your bottom line such as the danger of 179 deduction and selling the vehicle.
This is a great video!!! I learned a lot today. Thank you for this kind of excellent quality video.
Finally got a straight answer. I guess buying a car for my "online" business isn't necessary. Thanks for saving me future headaches.
It can be, If say you were shipping Amazon/eBay products and have to drop off. But you better have a log that shows and proves it.
I love your content. Very informative
Had to sub! Good content that applies to myself, looking to get a business vehicle for my startup.
Love this channel! After my wife being a 1099 contractor. We officially registered her business this year! LLC (s-corp). Learning more and more about tax from this channel
Nevis llc your welcome
I like the way you teach. Subbed
Great video thanks for the information
This was very informative. Thank you!
GEMS!! I honestly was wondering about that.
the best explanation i ever seen, thank you
Dude, you're awesome. Thank you for sharing these insights.
Amazing, #1 top gum explanation for code 179 …
Great information!
I needed to learn this. Thank you
Glad it helped!
Great video! You have a new subscriber my brother.
This Guy is Heaven Sent 💯
Great info!!! Ordinary & Necessary...
Great video
Another bomb of knowledge from these accounting wizards
Wonderful educational video. I am considering purchasing a vehicle using my business.
This is a great video
Very well done video
Glad you enjoyed it
That was great! Its nice to know that my accountant was correct.
So if you have a job making 200k a year and a tax obligation of 40k a year it would make sense to use 179 to start a transportation business
Wow I Felt like I overlearned before he even Introduced himself!! 😂😂🤠 Great Work !
Lol Thanks!!
I’m going to check out that second video.
thank you!
This channel the 1 forealll
Thanks
THE BEST Video EVER. Very True facts.
I tried to explain this to a nosy guy who got involved in my buddy's & my conversation. He thought if he sets up a LLC he can write off a car and get it for FREE (?????) without making any money (cause the internet strangers told him so). He got upset on me, when i told him, U HAVE to make enough money and the TAX value is the value of that car (and also it has to be used atleast 50-60+ % for the business).
I have a question! How would the IRS knows how much you use your car?
@@4everyoung16because you have to keep mileage records of business and personal use for every single trip. Or at least total mileage records with all business trips so you can show the math.
I learned the hard way. Had a business truck 50/50 personal. Ended up having to sell and paid capital gains tax. So basically all the savings up front were paid right back.
I mean that’s not entirely too bad. It’s not like you lost money. You just saved money when maybe you didn’t have it to pay a boat load of taxes, but once you sold the vehicle you had the money to pay whatever capital gains tax you had, which would probably be a lower cost in the long run depending on how much you sold the truck for later.
You made a gain on the vehicle and you're complaining? You also got an interest free loan.
Mmm. My two favorite words. Ordinary and necessary.
thanks a lot
To reason #3 there is a different schedule or time period for recapture tax. I believe vehicles is a 5 year period so it isn't ideally a death sentence if you write it off 100% with bonus depreciation but keep it for 5 years.
Finally someone to share real world consequences for trying to live in a dream.
You just dropped a huge gem.
The information is needed for sure. Thanks for watching.
Thank you this is so great, just have a question if you use section 179 and deduct the hall price of the car and after 5 years you decide to sell, should you pay back the recapture income tax? thanks
Let’s say I own a LLC as a disregarded tax entity, but I also get a standard salary from my primary job. If I have enough write offs to bring my LLC’s taxable income to below 0 will the excess write offs flow through to reduce the taxable income from my job?
Is there a source where I can start to learn the tax codes? I am new to this tax stuff because I would like to start a business but there is a lot of info out there and I need to know what is right and what is not.
does depreciation capture also accrue after the 5 year depreciation ? and if yes what to do with the car not to have that expense
Any vehicle can become a 100% business deduction, just by wrapping it with the contact info and logo for your business, correct? I have done this, and also taken advantage of Section 179 for over 20 years. The 6000 lb qualification is for regular cars, (ie G-Wagon, Suburbans, etc). There is another class for 15k lb and up commercial vehicles. I've never had an issue with 179, and I was audited twice. Both times, it wasn't the vehicles that triggered the audit. It was my 'independent contractor' status as a consultant working for headhunter. They paid me on 1099, but told IRS I was W-2. Once I sent my original contract to the IRS, it was resolved. I was indeed an independent contractor.
BTW, your channel is absolutely the best of its kind. Period. I recommend you all the time! Thank you for the great info!
Actually that is incorrect. Putting g a logo on a vehicle doesn't change it's deduction percentage. If you're still driving it 50% for personal use, the logo doesnt change the 50% business deduction to 100%
@@mtigress4589 serious question if you have your truck wrapped and your driving is your truck not being used as advertising which can lead to business ?
@@jbarres80 It is a one time advertisement expense for the cost of the wrap. It does not change the nature of the usage. If you're still driving around.picking up your kids and getting your kids 50 percent of the time wrap or no wrap, the business use is only 50%.
Exactly. You simply cannot drive a business vehicle for a personal trip regardless of what you are driving. However in practice I don’t see why IRS would question you if you have say a cargo van that has no seats. Where it’s glaringly obvious is when you drive a minivan with 3 car seats in the back and pretend that you aren’t picking up kids
@@dailyrant4068 if you have a cargo van and no other vehicles you'd still questioned about personal use.
Damn 6.9k views and only under 600 likes… smh hit that like button y’all
Can you apply Section 179 Expense against W2 Income? This is for a new business and filing joint.
LMFAOOO @ when he mentioned the yacht💀💀🤣🤣🤣
When I read section 179. I was wondering how the heck and why are people doing this.
At the end of the day it’s still a deduction. You are still making payments on the car.
Your business would have to still make money in order to write that deduction off. Your video pretty much explains it.
The deduction only reduces your taxable income. Which you still have to make money on the business.
Do you have a video specific for Uber/Lyft drivers who own their car?
I purchased a 6000lbs truck 3 months before I was fired from doordash, would I be able to get any kind of benefits from 179 tax break , the vehicle was used over 50% of the time
I bought a commercial vehicle last Oct. The business didn't make any money but had a ton of expenses. I plan on trading it in for pick up for business use. So basically I should not write it off?
what if you use your vehicle for personal use but it has company info on the vehicle as advertising? does that mean driving anywhere is now company business if advertising for your business is necessary?
Great information
My only complaint is talking with your hands the entire video lol
Is it accurate that if you choose section 179 for a business auto tax deduction in your first year you cannot go back to the standard mileage deduction? And if so, would you recommend perhaps taking the standard mileage deduction in year 1 so that if needed you could go back to using that method if beneficial?
How do they track if the vehicle is used 50% of the time or not? Based on owner's saying?
Can u offset w2 with this if the title is under business name
I don’t own a business and I work from home for a company in California. Is my Jeep Grand Cherokee eligible for IRS section 179? Should I write off my vehicle expenses?
Good video! But quick feedback: ask reads: A-S-K… not A-K-S…
I wanna work w these guys.
Thanks for the video. Can I use standard milage deduction for a car I list on Turo? I have had ixed responses from cpas because it's the renter buying gas
you can never write off an expense you don't actually incur. You will depreciate the cost of the car over time as a business use asset (if it's not 100% business use then you get the corresponding business use %)... and expense your regular operating expenses of owning the car just like you normally would....but you can't deduct mileage that your renters incur...
quick "hypothetical" question this may sound stupid. Let's say I have a salaried position making 120K per year subject to normal federal/state tax....then I did Uber Eats, and write off the depreciation of a recently purchased car, as well as the operating cost of the vehicle...which creates a net loss on that Uber eat personal business due to the high price of the car. Can I use the net loss tax deduction from the Uber Eat personal business and apply it to the 120K job completely not "related" to the business---let's say the 120K is a teaching job or an engineering job...
I'm curious since I've heard some people say they do this, and I don't believe it can be done.
So let's say I write off 100% of the vehicle in the first year. You mentioned if I don't use the vehicle for 100% use for business within give years I will have to pay some back. But what about after 5 years? After five years is personal use fine without penalty?
Do you have to be a LLC or Corporation? Or can this also work for Sole Props?
This will work for sole props as well. Just have to file a sched C
Keep in mind the IRS requires a business to deduct all legitimate expenses, including vehicle expenses and depreciation. If you fail to write off all expenses and as a result you increase your earned income credit, you could be in very deep trouble.
How would they know if you haven't reported all expenses? Just curious
@@ms.marynailz748 Obviously, without a full audit, they wouldn't. But keep in mind that the IRS has decades of statistics for all types of businesses, so anything too far out of the norm would be a red flag.
Asked
If you are an S-Corp doesn't the loss go to the owners personal tax return?
So in conclusion, don’t buy or lease a vehicle in your business name unless you’re ready to be subject to audit
Don't losses carryover to personal taxes?
Can I write off a vehicle that I'd purchase in my personal name since business is new and didn't have enough business credit or income at the time but solely use it for business?
Nope you cannot put it under name you have to put it under business LLC - corps and never pay cash finance it make minimum payment.
@@Mr.Bryan1234 I'm very confused, I bought a f450 and paid a big down payment out of my pocket because my business has not enough money on it, my cpa told me I can't put it as a deductible except for only the interest I'm paying to the dealer 😢
What about netting your business loss with your other sources
What happens if you sell your vehicle before 5 years but buy a new one that costs more then your old one ?
You still have to recapture any depreciation you took on the first car when you calculate the gain on the sale. The IRS used to allow like kind exchanges with vehicles/tangible property just like you can with real property...but that went away in the 2018 tax act.
Very good info thank you!
If I write off a vehicle using 179 for my business do I have to own it for 5 years before selling it to avoid depreciation recapture?
No matter how long you own the vehicle, you can't avoid depreciation recapture.
What if your a new start up and need that vehicle solely to operate the business?
If it is ordinary and necessary for your business, IRS should have no issues.
@@LYFEAccounting absolutely 😎
I do like what you're saying although I just watched the other guy and girl from this channel talking about the exact opposite 🤔
Thanks for watching both! Just two sides of the same deduction: pros and cons. Every deduction isn’t right for everybody.
How about a W-2 employee is it good to write off vehicle expenses?
w-2 are not eligible, unfortunately.
What happens if when purchasing a vehicle at a dealership, they try to collect tax title license and you inform them that you are shipping the vehicle overseas, and won’t be registering the vehicle?
This is where you can’t cheap out and ask RUclips. Clearly it’s a situation worth paying a CPA for. My sincere two cents
Taxes are based of registering address not the retailers address. Most dealerships can not do out of state registration and tax remittal. You will need to contact a vehicle importer/exporter to get all the receiving countries laws and requirements on importing vehicles since they are all varied. Duty fees vary based off vehicle classifications i.e Trucks, SUVs, Cars...etc., Age of the vehicle, some countries even require certain types of glass for windshields and 2nd row doors or interior/exterior light certifications. Hope this helps you out. Just pay for the vehicle via cash AFTER your transport company tells you the required docs needed to be sent to the customs portal to ensure they'll receive the vehicle and not turn it away, give you hefty fines or gets held up at customs while charging you massive storage fees. The transport company will also have a doc or instruction guide to give to your dealer that'll tell them how to handle the titlework
How would the IRS know whether or not the vehicle is being used for the business or personal?
They will mostly take your word for it. But if you use it for business, you are expected to keep some sort of mileage log so you have a record of the number of miles driven for business.
They don’t until they audit you. Then like many business owners you don’t keep log because you probably don’t actually drive it 100% for biz and then have to fight the penalty
Is section 179 only for “new vehicles” ?
I just brought a uses 26000 in math now it's at70000 and I still have to pay for another 4 more years what do I do
But they do not know how much you use it for the business
Therefore they can not say you didnt use it full time
Can you write off your whole car if you're financing it? Or do you have to pay cash for the car to do it?
You can finance it.
So basically, what he is saying is if you are for example wanting to write off a $40,000 vehicle for your business, make sure your income for the business is above $40,000 for it to actually be beneficial?
How does the IRS determine that you are not using your car for business enough?
Great question
It confuses me the whole depreciating the whole purchase price of the car. So if a car cost 70k and you write off the 70k in the first year. What exactly are you doing? And are you still making payments towards the 70k?
Might sound like a dumb question I know :( but at least I’m being honest
Yes. You still have to make payments and when you sell the car you have to recapture the depreciation you used in year 1.
@@marcpena3197 thank you for the info
Where can I get that jacket?
Good question
I’d still write it off, because you can continue those losses over until they’re used in other years when you do make money.
I was told by an accountant that business losses would offset W2 income. Was that incorrect?
@James Karrie 80%? Thank you.
If it's a LLC no. If it's a sole proprietorship yes
With the new push for EV's, Im sure the cars will become lighter in weight. Could effect the deduction. Also, I prefer "leasing" vehicle in company name, so all is a business expense, all repairs covered under warranty as you wont keep it more than 3 years and if ever having assets attached by courts, vehicle is not yours. Sometimes "renting" better than owning.
Great points. Currently, electric cars weigh about 1k pounds heavier than similar gas vehicles because of the weight of the batteries 😉
EV’s are actually heavier
Special tax credits for EV
Where are you located?
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“As an accounting firm we get axe”
So basically my $26k pickup truck for my welding business is a necessary purchase obviously by both me and the irs, it won’t bring me into any super negative profits if I write the entire thing off so it’s worth it there, it’s obviously over 6k lbs, and it’s used for businesses purposes 90+% of the time. From what I gather from your video, Im in the perfect situation to write off the entire vehicle???
Assuming that you want to lower your taxable income yea. However lowering your taxable income has its associated cons.
@@SuccessRendering-hc6ht What are these cons you are referring to?
@@kuntakentay6969 available credit. Debt to income ratio.
Just in the first 3 minutes, I can say that the -$15000 net loss can be transferrd to your K1 and then personal to reduce your own taxes.
👍
after you 100% write off a car for business can you stop using it for business & use it for personal?
If you stop using the vehicle for business and use it totally for personal, then you will have to recapture the depreciation you've taken. That means the depreciation you've taken (or were allowed to take even if you took no depreciation) becomes taxable income in the year you stop using the vehicle for business.