what are the finer points of making a successful vehicle deduction under section 179 of the irs tax code?

Question

i am confused by the language in the tax code...does the vehicle have to weigh more or less than 6000 pounds? or does that only matter if it's an suv? does an suv have to weigh more than 6000 pounds but a sedan can weigh less? is there a minimum weight? i am not interested in alternative vehicle tax credits. what exactly do i need to know to minimize my out of pocket expense in purchasing a vehicle and claiming it as a section 179 deduction?

example: could i buy a bmw x5 and deduct its cost if it weighed less than 6000 or must it weigh more than 6000 pounds? could i buy a chevy camaro (obviously weighs less than 6000 pounds)?

also do i understand correctly that one has the option of depreciating the cost of the vehicle over the life of the vehicle or expensing the complete cost of the vehicle all at once? ...or both?

thanks

does the newer legislation limiting passenger cars and suv's to a $25,000 credit mean that i can subtract that amount from the total cost of the vehicle...eg...BrandX CarY costs $33,000-$25,000 tax credit=$8,000 total cost of vehicle (not including taxes/registration/etc.)?

Answer 1

The $25000 limit is a deduction, not a credit, so no your car that costs $33,000 now only cost you $8000 out of pocket. we'd all be buying our cars that way. Qualifying for the section 179 extra depreciation (also called expense) is difficult and very detailed. The idea of seeing a CPA, Enrolled Agent, or Tax Pro with many years of experience (especially with businesses like sole proprietorships) is a very good one. There was a lot of talk about a loophole that let rich people deduct huge amounts off their taxes if they bought hummers. The newer legislation fixed that, but the cars had to be used for business purposes more than 50% and their deduction is limited to the business % use (so a car used 60% for business only gets 60% of the deduction). Talk to an expert before buying and make sure you keep a log of your business use in case you are auditted.

Answer 2

Well the finer points are generally related to not using a highly priced vehicle as your deductible work car. You will find that there is a limit to the value of the car that you assign as well so your BMW X5 will more likely than not be limited in the value that you can use for depreciation.
In the case you site, unless you are using this vehicle 100% for business I would at least take a good look at the mileage deduction allowed rather than using the vehicle deduction. Less of an audit flag and it might be close to the same tax advantage unless you are using it 100% for business.

Answer 3

The business-use vehicle must weigh more than 6,000 pounds to get the extra depreciation.

The $25,000 depreciation is taken first, and then the regular depreciation is taken over the rest of the value.

You do not receive this money in the form of a refund. These are deductions, not credits. These deductions reduce your taxable income, and thus taxes you owe. The deductions for the SUV purchase may or may not result in tax benefits to you.

Go over the details of your planned purchase, plus your tax information, with a knowledgable person to determine the actual tax benefits of your purchase.

Answer 4

Whoever told you that anyone over 65 who makes less than so much per year is not liable was probably talking about the criteria for having to file an income tax return, which has nothing to do with owing back taxes. I was a volunteer for the IRS for six years, doing income tax returns for the low income and elderly through the VITA program. I agree with the previous answerer who said to get rid of the lawyer and talk to the IRS directly. They will work with you.

Answer 5

Sounds like you can afford a CPA and get some good professional advice, rather relying on the curbstone opinions on the Internet. Accountants who are enrolled agents are also qualified to help you.