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Model X IRS 100% Deduction “Hummer Loophole” - 2018 Edition
- Thread starter MelaniainLA
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- Model X section 179 tax break
So should I try and use a different way to get a tax break if I dont want to worry about recapture ? I dont need 70 or 80k in tax breaks but a nice 10-20k would be nice. Although, this recapture stuff seems like too much risk when you could just use the mileage or regular depreciation, right ?
Right, take the EV tax credit and then use the standard milage depreciation rate. (Mileage and standard/ accelerated depreciation are mutually exclusive). Based on your loan and your driving profile, it can cut the cost of the car way down.
Or, plan for recapture and keep the tax savings in a separate, money making, account for when you sell. Basically deferring your tax payments.
I also believe the EV credit reduces your basis 1:1.
Okay, so I might be completely wrong here, but is section 179 and 179.a the same? If so, recapture ends after 3 years 26 CFR 1.179A-1 - Recapture of deduction for qualified clean-fuel vehicle property and qualified clean-fuel vehicle refueling property.
From my reading, 179A is separate and was only ever a $2,000 deduction for vehicles. By 2006, the max deduction was $500.
Edit: looks like it was phased out in 2009 for refueling equipment. Internal Revenue Bulletin: 2007-22 | Internal Revenue Service.
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I'm going to have to read the tax code then talk to my CPA when I get a chance then, or does anyone know for sure how long you must use the vehicle to avoid recapture.
I think the same. Once it becomes business Property, my understanding is that if the business sells it after it’s fully deprecated, it’s considered business income. Eh?
I'm going to talk to my CPA this week if I get q chance but I'm probably going to just avoid section 179 entirely.
I’ve gone down this road before. In the end, expensing lease costs was optimal. But, if you must own, taking the mileage expense is better than facing recapture with Sec179 (if you will be driving a lot). Though Sec 179 can help to defer taxes if you anticipate to have a large income tax bill in a given year.
Quick question on this topic.
Example business income is 100,000 in 2018
First year equipment/rent/salary/utilities is 250,000
That’s a net operating loss of 150,000
Since the business is already in a loss position the section 179 deduction on say a 100,000 Tesla MX is not applicable in 2018.
Can the deduction be carried forward along with the remaining 150,000?
Would this then be a net operating loss of 250,000 in 2019?
So in 2019 if business income is 420,000
Expenses are 100,000
Leaving taxable income at 320,000
We are eligible to use our carried forward operating loss to offset 80% of the 320,000 in 2019 (up to 256,000)?
So 320,000 - 250,000 = 70,000 in tax liability?
If the business is already showing a loss and the 179 deduction for that year is not eligible to carry forward then it should be purchased in a subsequent year where deductions are needed to offset income.
Am I understanding that correctly? Obviously I’m also asking my cpa but heck there seems to be a lot of knowledge here and I like understanding it better and just confirming with cpa instead of just relying on one source.
Example business income is 100,000 in 2018
First year equipment/rent/salary/utilities is 250,000
That’s a net operating loss of 150,000
Since the business is already in a loss position the section 179 deduction on say a 100,000 Tesla MX is not applicable in 2018.
Can the deduction be carried forward along with the remaining 150,000?
Would this then be a net operating loss of 250,000 in 2019?
So in 2019 if business income is 420,000
Expenses are 100,000
Leaving taxable income at 320,000
We are eligible to use our carried forward operating loss to offset 80% of the 320,000 in 2019 (up to 256,000)?
So 320,000 - 250,000 = 70,000 in tax liability?
If the business is already showing a loss and the 179 deduction for that year is not eligible to carry forward then it should be purchased in a subsequent year where deductions are needed to offset income.
Am I understanding that correctly? Obviously I’m also asking my cpa but heck there seems to be a lot of knowledge here and I like understanding it better and just confirming with cpa instead of just relying on one source.
That has been my non-CPA understanding... feel free to PM me to discuss my experience etc.
Why not look into a A Terminal Rental Adjustment Clause Lease?
You basically set the depreciation/deduction schedule you want with your qualified CPA. Run this buy your CPO but you can technically do a 3 year lease under this type of lease and set the depreciation to 70% to maximize your lease payments. The lease payments could be tax deductible based on business use. At the end of the 3 years you can then buy out the leased vehicle for 30%.
You basically set the depreciation/deduction schedule you want with your qualified CPA. Run this buy your CPO but you can technically do a 3 year lease under this type of lease and set the depreciation to 70% to maximize your lease payments. The lease payments could be tax deductible based on business use. At the end of the 3 years you can then buy out the leased vehicle for 30%.
@cpa instead of taking 100% bonus depreciation and making the entire amount of depreciation subject to recapture, wouldn't it make more sense to depreciate $25k of the cost using section 179 and keep the car for 5 years to reduce the recapture amount associated with bonus depreciation?
On another note, one of the members mentioned something about a Terminal Rental Adjustment Clause Lease. Do you have any advice there?
On another note, one of the members mentioned something about a Terminal Rental Adjustment Clause Lease. Do you have any advice there?
For those who are interested in this deduction (and eligible for it) and want free unlimited supercharging, that promotion ends today (9/16/18) when using a referral code from an existing owner.
Feel free to send me a PM with any questions.
Feel free to send me a PM with any questions.
It actually ended yesterday for me. One the many locations where Sunday automobile sales are prohibited by law. Go figure!
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