Part 2: Vehicle 100% Tax Deduction (Auto Depreciation) SUV & Truck Write Offs for Small Businesses
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- Опубликовано: 22 авг 2024
- SEE PART 1 OF THIS VIDEO • SUV & Truck 100% Bonus... AUTO TAX DEDUCTIONS: 100% Business Vehicle Deduction Under IRS IRC Section 168 (Bonus Depreciation) Ends 12/31/22 for Vehicles Over 6,000 Pounds GVWR (Gross Vehicle Weight Rating) Such as SUVs and Trucks. See my tax seminars! www.jjthecpa.com/
VIDEO TO HUGE AUTO TAX DEDUCTION
• How to Get Vehicle Tax...
VEHICLE TAX CREDITS FOR HYBRID & ELECTRIC VEHICLES
• Inflation Reduction Ac...
JJ THE CPA's Seminars, Books, Website and Social Media Links
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JJ THE CPA's Website:
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IRS Publication 463
www.irs.gov/pu...
IRS Topic No. 510 Business Use of Car
www.irs.gov/ta...
2022 AUTO MILEAGE RATES (IRS RATES)
1/1/22 - 6/30/22 58.5 cents per business mile
7/1/22 - 12/31/22 62.5 cents per business mile
2021 VEHICLE MILEAGE RATE (IRS RATES)
56 cents per business mile all year
Per IRS: If you use your car only for business purposes, you may deduct its entire cost of ownership and operation. However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use. You can generally figure the amount of your deductible car expense by using one of two methods: the standard mileage rate method or the actual expense method. If you qualify to use both methods, you may want to figure your deduction both ways before choosing a method to see which one gives you a larger deduction.
SECTION 179 AUTO DEPRECIATION, SECTION 168 VEHICLE DEPRECIATION (BONUS DEPRECIATION), MILEAGE RATES, TRAVEL DEDUCTIONS, RELATED BUSINESS DEDUCTIONS
www.irs.gov/ta...
Does the IRS legally allow a 100% auto tax deduction? How can you tax deduct 100% of your vehicle expenses as a self employed (sole proprietor) or small business owner? What auto expenses can you write off for tax purposes under your LLC, sole proprietorship (Schedule C), S Corp (Form 1120S), Partnership (Form 1065) or C Corp (Form 1120)? If you take advantage of this depreciation method for the automobile, then you also take advantage of deducting all the actual, other expenses of the vehicle. While there is the option to take the auto mileage rate tax deduction on the business miles (see auto mileage rate 2022 below), you cannot use the mileage rate tax deduction if you depreciate the vehicle (taking actual expenses) as it is an either/or selection. There is another option for a big, first year tax deduction on vehicles over 6,000 lbs. GVWR which is under IRC Section 179 auto deduction (suv deduction or truck tax deduction), but that is limited to $27,000 in 2022 or $28,900 in 2023 (or the purchase price, whichever is less); and thus, if you are using the actual expenses method, it would make more tax deduction (tax depreciation) sense to take the 100% bonus depreciation tax deduction under IRC Section 168; and forgo the IRC Section 179 SUV, Truck Tax Deduction. See video link below about the Inflation Reduction Act Vehicle Tax Credits and the electric vehicles tax credit limitations as well as hybrid vehicles tax credits on used electric and hybrid vehicles; EV credits.
JJ THE CPA ALSO COVERS: How to Start a Business. How to Set Up LLC. Limited Liability Company (LLC). How LLC Taxed. Related: LLC vs Corporation. LLC vs. Partnership. LLC vs Sole Proprietorship. LLC is Legal Designation Only. LLC Taxed as Anything. LLC vs Inc. LLC vs LLP. LLC vs DBA. What is LLC Mean? What is LLC Stand For? What is LLC Business? How to Create LLC. Should LLC Be Taxed as S Corp. Should LLC Be Taxed as Partnership. Should LLC Be Taxed as Sole Proprietor. Should LLC Be Taxed as Corporation. Related: What is LLC Operating Agreement? Should LLC be in Logo? TOPICS IN THIS VIDEO FOR SEARCHES: jj the cpa, auto deduction, auto tax deduction, vehicle tax deduction, suv deduction, truck tax deduction, suv depreciation, truck depreciation, auto depreciation, mileage rate 2022, mileage rate 2021, vehicle mileage rate, auto mileage rate, suv 2022, truck depreciation rate, tax mileage rate, tax depreciation, depreciation, section 179 depreciation, section 168 depreciation, bonus depreciation, 100% vehicle deduction, self employed, self employment tax, irs tax, jj cpa
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![How to Get Vehicle Tax Deduction [Over 6,000 lb. GVWR] Auto, SUV & Truck 100% Depreciation Saves Tax](http://i.ytimg.com/vi/68jZfNyws18/mqdefault.jpg)
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Thanks for watching! SEE PART 1 VIDEO ruclips.net/video/7xLaDR53Dl8/видео.html SEE ORIGINAL VIDEO BEFORE PART 1 ruclips.net/video/68jZfNyws18/видео.html SEE MY TAX SEMINARS www.jjthecpa.com/
Great video--much clearer and simpler than many others. Your chair is also boss!
Thanks so much! I really appreciate that!!
at 3:40 in the video you make it sound like switching from the actual cost method to mileage method in future years is permitted. IRS Topic 510 "To use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business"
Correct. I provided a link to Topic 510 in the body of the video. What I said is, if you take mileage rate first year, and then actual expenses after that, you can’t take bonus/179 as it’s only allowed in first year.
Thank you so much for your valuable video and the effort you put into making it! One question because I am a little bit confused. Let's say that I buy a vehicle next year (2024) and the cost deduction is 60% for 2024. Did you say that I would still be eligible to take the rest 40% of the cost of the vehicle in the following years (2025 and after) and if yes this will be distributed over the next 5 years in total? Or I will only have the 60% deduction in 2024 and that's it. Thank you for the clarification and I appreciate your time.
Thank you my friend!! You would get the remaining cost over 5 years! So after 5 years, all of the vehicle would have been depreciated/deducted
Great channel that I found in a search about the 100% deduction… seems I’m a few months late but hey, there’s always 80%!!! I guess I don’t understand (new LLC taxed as S Corp here) about how these work… is it as simple as if I buy a qualified vehicle, I can get 80% of the purchase price taken off my tax owed when I file my taxes for 2023 next year??? If so, it’s a no brainer and I can’t believe I didn’t do this last year!!!
Hey Chris! Thanks for the kind words! The 100% deduction in 2022 (80% 2023) is a reduction of your “taxable income” and then saves you at your tax rate. So if your (average) tax rate is 30%, then a $50,000 vehicle reduces taxable income by $50,000 in 2022 ($40,000 2023), and at 30% tax rate, bottom line tax savings would be $15,000 2022 ($12,000 2023). Hope that helps!
Thanks for your videos JJ. If I take bonus depreciationI for a newly acquired SUV over 6000lbs, 12/1/22, and my business use drops below 50% in 2023vs will I be penalized or have recapture next year JJ? Thank you!
JJ, I'd really like to know the answer to this question too?? Thank you again for your time! Nikos
Hey Eddie! Sorry for the delay. If you elect bonus deprecation under IRC 168, it will not. If you elect depreciation under IRC 179, then yes. We only elect 168 with my clients.
@@JJTHECPAusa Thank you!! I really appreciate the info!!
@@nikosgutrugianios8777 You bet!
@@JJTHECPAusa I have one more question if you have time. I just purchased an SUV over 6,000 lbs for a side business I just started. Business has no income yet, only expenses. I plugged the 100% depreciation in and it offset my W2 income and showed a large refund. Just want to confirm Section 168 doesn't just offset self employment income, but also W2 income as well? Thank you again for your time in advance!
Thanks, answered my questions.
Glad I could help!
JJ, I am filing a Schedule C (along with W2 earnings) in my 1040 return and before applying bonus depreciation for new vehicle I just placed in use in 2022, showed a net profit and I had tax liabilities to federal and state. Once I applied bonus depreciation, it then turned into a net loss amount and created state and federal refunds instead. Is that something I should be concerned about in terms of federal or state scrutiny? Can you shed any light on this please?
I’m excited that you are taking advantage of this tax law. You should absolutely have zero concern, zero worries about the result of you taking bonus depreciation. The IRS and state governments don’t determine what they want to scrutinize based on the size of a deduction, or if you got a refund or if you owed or any factors that we may think, as what they are only concerned with is, was it done properly. So, if you are doing this properly, which you are, then you actually have zero worries. Think of it as if you played a sport when you were growing up. Did you decide not to play the sport because you were concerned the referee or umpire would call you out. Of course not, right. You play the game, and if there’s scrutiny and you do it right you still got no concerns. So take advantage of it as you deserve it, that’s what it’s there for. If they didn’t want you to get the refund, they wouldn’t put the law in play for you to take advantage of. You got this!
Great Video. Does the car need to be New to take advantage of the 100% deduction?
Thanks! Can be new or used!
Hey JJ! Let's say a business buys a 6k GVWR vehicle before the end of 2022 for $100,000, uses it 100% for business in 2022, and takes the section 168. In 2023, the business sells the vehicle for $90,000. Is the $90,000 taxed as income in 2023? Please advise, my friend.
Hey Matt! Yes, which works like any asset sale.
I completely understand… however, myself… I am trying to use H&R Block software to file and it forces me through steps that limit me to 19,200. Vehicle elected in all steps as SUV between 6 and 14,001 lbs. I would LOVE to see a video walkthrough of actually filing for the section 179 deduction. Love your videos
Thank you! Wouldn’t know on that software. Sorry. Appreciate you watching my videos.
Thank you for the video good sir
You are awesome!
Thank you my friend!!
Hi JJ! Great video, I just have one question. So If I purchase Vehicle this year of 2023 that qualifies for the write off, will I only be getting the 80% or the full 100%. Thank you for your helpful videos!!
Thanks Ethan! Purchased in 2023, the max deduction is 80% of the purchase price.
If we have never taken the Tax Deduction for the vehicle, ie. 100, 80, 60% etc, are we just SOL.
No, as you take depreciation (this) in the year first used for business purposes.
Thanks for the vid! i’m looking to purchase a Jeep Grand Cherokee before the year end. 2 questions:
Does the car need to be paid in full cash to receive the full tax deduction 2023? Can I finance the car can still deduct the whole cost of the car ?
does how i use my car (personal/business) in 2023 matter when filing my 2022 taxes next year?
like say if my car usage drops to 50% in 2023, will that affect my deduction when i file my 2022 taxes?
You bet! It doesn’t need to be paid in full, as it’s based on the purchase price.
If you elect bonus deprecation under IRC 168, it will not. If you elect depreciation under IRC 179, then yes. We only elect 168 with my clients.
Hi JJ. Great information , I started an LLC in June of 2021 but had already purchased a 10K GVWR vehicle in 2020. Can I write that off at 100% or would that be at 80% since I purchased in 2020?
Thanks! You deduct in the year it was used for business, even if bought in a prior year. Then whatever year it starts being used for business is the year you follow in terms of the percentage write off.
Hey JJ. Excellent information as always. Here's my question. How many vehicles can you have for your business? Isn't it possible to have 2 business vehicles or more. For example, you purchase a heavy suv in 2022 and IRC Section 168 bonus the vehicle for your business use. In 2023, you purchase another vehicle for your business and IRC Section 168 bonus for the business use. It would seem that since there isn't any requirement in a subsequent year to maintain a business percentage usage, one could buy new vehicles every year?
Hey Frank! That is all true. You can have multiple cars in one business and bonus as you indicated.
@@JJTHECPAusa - Some parts of the tax code aren't so bad!
@@frankacquarulo458 That’s true! Great way to look at it.
How about leased Vehicles?
Great video thanks you.
Thank you! Depreciation is not available on leased vehicles, because they are not owned.
Hi, JJ - Can you take advantage of section 179 if a car was purchased prior to forming the LLC? They both happened in the same year, but the car was purchased about six months prior to forming the LLC.
Hey Brad! Yes, but carefully. The vehicle, like any asset, is depreciable when 3 things happen. 1) Purchased 2) In possession 3) Placed in service meaning business use starts. So, line those up to match the LLC formation, if possible. Not advocating manipulating this but only you decide when it starts being used for business.
For the sole proprietor LLC filing Schedule C, no further action.
For LLC taxed as partnership, s Corp or c Corp, you then need to have the LLC on the title as the LLC needs to own the vehicle (like any asset) to take 179.
Hope that helps!
I’m a full realtor but also work a full time and have rental properties. I currently have an over 6k vehicle. ( Land Rover) looking at trading in and purchasing a new one. Not sure what my CPA uses for me 168 or 179. If I purchased this the car would be 80% write off? It’s $80k. I’m going to sell current car($20k) to other dealership for better price so then I will put the money they give in new car, is that going to hit me on taxes for $20k since I’m not trading it?
In 2023 it’ll be a 80% tax deduction under 168. Yes, that’ll be a $20K taxable income. Think of it as an offset to the tax deduction. Also, under current law, trading no longer defers the gain, so selling is same result.
Hello JJ, for 2023 should i trade in 2020 truck for new truck to write off on business? Since new business started in 2021. IRS 179 is changing for 2023 can you explain?
Hey Issac! When trade/sell, the amount received is a taxable gain. To offset you’d need buy something to just offset that, and get the difference. So, may not be as valuable tax deduction as originally. If don’t really need another/different/new vehicle, consider putting more money in a tax deductible retirement plan, as the money spent goes to you down the road.
179 not really changing in 2023. It’s 168, which is simply 80% allowed vs. 100% previously.
Hey JJ -- thanks for putting out all this info. I've scoured every resource on the internet and your video seemed to help a lot, but still have a final question.
Let's say I purchase a $75k truck in 2023 and take the 80% deduction under Section 168(k). In 2024, things get tough, and I sell the truck for $55k.
Would the "recapture" amount be based on the sale price, minus the remaining adjusted basis ($15k), or $40k net gain? Since it's sold before it's 5 year useful life, would it switch over to standard depreciation and then charge me a large recapture tax?
I can't find any answers that answer recapture when doing 168(k), and if you have to own the vehicle for the entire 5 year useful life, or not.
Hey Justin! Thanks for the kind comments!
Great question! Yes, it’d be a $40,000 net gain.
For anyone reading this, here’s what Justin and I are solving.
Just like with any asset sold, it’s always simply:
Purchase price $75,000
“Minus” whatever depreciation has been taken (the recapture) 80% or $60,000
“Equals” tax basis $15,00”
Then,
Sales Price $55,000
minus tax basis $15,000
Equals taxable gain $40,000 gain
@@JJTHECPAusa Thanks so much, JJ! Have you heard about if you sell it before its 5 year useful life, you have to instead recalculate depreciation with a straight-line method, then pay the difference between the depreciation you took & what it would be following the straight-line method? And then on top of that, any gains between the sale price and new book value using the straight-line method.
Also with the above scenario, how do you depreciate that remaining 20% not covered by bonus depreciation? What method of depreciation would that follow in years 2-5 of the vehicle life?
(I am building a spreadsheet to calculate this so your answers are SO helpful!)
@@justinreels IRS only requires you recapture depreciation taken, regardless if MACRS, 168 or 179 or how long you’ve owned it. The other 20% is depreciated over 5 years, starting in year one.
Hello. Great video. Any difference in tax savings in purchasing a 6000 gvwr car vs truck/suv ?
Thanks! No, the only requirement is being “over” 6000 lb GVWR.
@@JJTHECPAusa thank you!
JJ, What if I bought the vehicle in 2020, and because idk this deduction existed I only elected the standard vehicle mileage deduction. Can I add it to my 2021 mail in tax return or even 2022 and get the 100% deduction?
I’m currently still in IRS pay plan for the 2020 taxes
Tito, One can only take it in the 1st year it’s used for business. So in 2021 you would be able to get Year 2 depreciation which is approx 1/5th. If you haven’t yet filed 2021, you possibly could amend 2020 and instead take 100% bonus depreciation in 2020. However, IRS won’t allow you to change 2020 if you already filed 2021.
What if the vehicle isn't under my S-Corp, but payments are being made from the S-Corp? Can I deduct anything from that piece of equipment, e.i. lease payments?
Yes, and get the S Corp on the title. Co-title it.
I was going to purchase my business vehicle next year but want to take advantage of the 100% write-off. Seeing that it is only a week away from the end of the year. If I purchase a $65K vehicle in my business name that is over 6k GVWR before Jan 1st, am I able to take advantage of the 100% tax write-off?
You bet!
@@JJTHECPAusa Awesome I plan to purchase outright... cut a check for $65K
@@abiyahadoniah1013 Nice!!!
Novice here... when you say 100% Write-Off, how does this work if the $65K Truck is financed over 3-5 years? $100% depreciation for the year purchased? Th ants in advance. Great videos.
@@TalentNetworked Thank you! Yes, the deduction is in the year of purchase, regardless of down payment, trade in or financing. When you purchase the vehicle with a loan, you fully own the vehicle and just owe the bank. So, IRS would only allow the 100% in the year of purchase.
Does the vehicle need to be brand new (not pre-owned) to qualify for the 100% deduction. Purchased from a dealer? Thanks.
The law allows new or used vehicles to qualify. Thanks!
How do you put a new vehicle under your LLC, if your LLC is new and has no credit line but my personal credit is excellent, however I’m looking into purchasing a new truck for my company?
That’s the case for everyone. You add the business to the loan as a guarantor and add the LLC to the title.
I purchased a vehicle under my llc and I’m filing an llc. Am I able to write off 100% the cost of the vehicle? If so, if I sold it later would I be penalized?
If you used it 100% for business yes. With any business asset sold, the sale is a taxable event, whether car or not. Buy $60K, write off $60K. Sell for $30K, pay tax on $30K.
@@JJTHECPAusa thank you! And do I have to worry about audits? I’ve heard that these type of write offs are audited often
@@daejones05 In 30 years, I’ve never had a client get an audit over this.
Hi JJ, quick question regarding my new business car purchase and title. I am employed by a company, but separate to that, I also own my own business and am purchasing a qualifying SUV for this business. For tax purposes on my business, I am a sole proprietor and complete form 1040 and a Schedule C. My business does have an EIN and is registered as an LLC, but since it is just me, the income from the business is added to the income I earn from my other full-time job. Since I am a sole proprietor and complete Schedule C, can I still purchase the SUV in my personal name vs the business name and take advantage of Section 179 and Actual Mileage (even though my small business has an EIN)?
You can take advantage of depreciation in your situation, and if filing schedule C, the vehicle doesn’t necessarily need to be titled in the LLC/EIN, as the IRS doesn’t recognize a schedule C business as separate from you.
You can either use the mileage method or actual expense/depreciation method in any given year, and if you don’t use the mileage method in the 1st year, you can’t use the mileage method in future years, for that vehicle. More info www.irs.gov/taxtopics/tc510
@@JJTHECPAusa Thanks so much JJ for your quick and detailed response! To confirm, can I also take the Section 179 deduction on the cost of the car purchase ($28,900) in this scenario?
@@user-gh7bs1rz9j You bet! It’s either mileage rate or Sec 179 depreciation or Sec 168 depreciation. Note: Section 179 is allowed only to extent of net income. In 99.99% of scnerios you would take section 168 depreciation over 179 depreciation. Sec 168 is not limited in the amount or limited to net income.
What are my options if I am a 1099 Independent Contractor and I use a Dodge Durango (over 6000lbs) for business...but it's Leased?
When a vehicle is leased you can simply deduct the monthly payment, to the percentage used for business.
@JJ THE CPA by it being over 6,000lbs does that allow me to write off 100%? Also, am I able to get Bonus Depreciation?
@@mauricecalhoun3778 It allows for bonus depreciation but in 2023 it’s now 80% year 1
CAN I STAR TO DEPRECIATION NESX YEAR AT DATE PURCHASE
If the next year is also the first date you used it for business, yes.
First , thank you thank yo thank you so much, second, I already filed my tax 2021 can I do amendment to get 100% deduction on vehicle I bought on my schedule c as a self employed, please help so I can take action
You bet! Thanks for watching! Yes, you can easily amend your 2021 tax return to account for this. Amending a tax return isn’t a flag either. File Form 1040X with the new forms. Have your tax pro do this, if you haven’t amended a tax return before.
@@JJTHECPAusa you’re amazing, I learned a lot from you , thank you
@@samjal6775 Thank you my friend!! Appreciate that!
Does my LLC have to have profit to write off the entire truck?
It doesn’t if you elect bonus deprecation under IRC 168 as it will increase the loss. If you elect depreciation under IRC 179, the deduction will carry to the next year to offset future profits.
How can I get a hold of you
I appreciate that! Hate to say, I haven’t taken on new clients since 2018 due to time constraints.
can you personally lease it to your partnership?
Typically you wouldn’t want to because it’s lease income to you, even though a possible expense to the business. A lease won’t yield this tax benefit as it requires an asset you own.
Can you finance the car and still get the deduction?
You bet! I cover that in this video.
@@JJTHECPAusa I have a question so if I get a $70k vehicle for business use, and I owe about an average 10k a year in taxes then how does that work?
@@jacksonbui8560 The deduction, like any, reduces your taxable income and if you multiply that reduction amount (the deduction) by your tax rate, that is the actual tax savings.
@@jacksonbui8560 Example: Taxable Income before deduction $170K = $29K tax
Deduction $70K. Taxable income after deduction $100K. Applicable tax rate 22%. Tax is then $13.6K
So, $70K reduced tax $15.4K ($70K x 22%)