Do I have to purchase a new car to write it off? or can i buy a used car?

Question

I am a Loan Officer and also just got my AZ Real estate lic in November. I will have about 7000 in taxes due for my income as a loan officer. I wanted to purchase a larger vehicle since I am now a real estate agent.

How can I purchase a vehicle this year and use it as a tax deduction for a business vehicle. Can I only write of mileage? Or can i write off so much of the vehicle over a set amount of time? I have two friends, one who builds homes, and he buys a new truck every 2 years to write it off for taxes. The other has a corporation and does the same thing.

Can I purchase a used vehicle? or does it have to be a new vehicle to write it off?

Can I write of the purchase of the vehicle? or only the miles in my case?

Answer 1

There are 3 different ways to structure it:
1. Lease the car. The monthly payments are tax deductable.
2. Track your mileage and costs to run your vehicle. Calculate your tax deductable amount based as a percentage of the total mileage for the physical year
3. Buy the car (new/used). You will only be able to offset a certain percentage of the purchase costs over several years. The percenatge and the rate differs from country and state. Check with your tax advisor/accountant. Generally this is less tax efficient than leasing.

In the long run owning a car outright for 10 years is financially the best thing to do. Leasing is the best from a tax standpoint if you must have a new car every 2 or 3 years. Option 2 is the best if you own a private vehicle for company use.

Judging by the amount that is taxable income, it may not be worth your while taxwise to buy a car yet.

Before you do anything speak to your tax advisor before making any decisions as how to best proceed given your unique circumstances, as everyone is different and one has to look at this in terms of the big picture.

Answer 2

Wayne Z makes a good point about using the mileage rate method. It is much easier than keeping receipts and documenting all your mileage. In addition, you can only deduct a certain amount each year. Internal Revenue Code section 280F over-rides section 179 (the one that gives you a 100% deduction on most assets) so your deduction is limited to:
$2,560 for the 1st taxable year in the recovery period,

$4,100 for the 2nd taxable year in the recovery period,

$2,450 for the 3rd taxable year in the recovery period, and

$1,475 for each succeeding taxable year.

If you buy an SUV over 6,000 pounds it qualifies for the s179 deduction, so you can take the whole cost (to a maximum of $25,000) as a deduction in year one.

Whichever way you look at it, you will have to record business mileage at a minimum. What is it worth to you not to have to keep full receipts and record private miles as well? If this is something you do not want to do, the mileage allowance will probably suit you best and, as has been observed already, will probably give you a larger deduction if you buy a used vehicle.

Answer 3

It can be used. With used vehicles it is usually better to take the standard mileage rate as the yearly depreciation is pretty low.

Answer 4

you will get a tax write off on new and used autos offering that that's used for organisation (this does not advise holiday to and from paintings). paintings correct could be a revenues individual who's require by utilising his business organisation to visits shoppers and so on..