BEST Vehicle Tax Deduction 2023 (it’s not Section 179 Deduction!)
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- เผยแพร่เมื่อ 30 ก.ค. 2024
- In this video I share some information about why I chose to use the Standard Mileage Rate Vehicle Tax Deduction as opposed to using the Actual Expenses Vehicle Tax Deduction. Here is my other video ( • Standard Mileage Rate ... ) about using the Standard Mileage Rate vs Actual Expenses. So, which one should you take?...the standard mileage deduction OR the Actual Expenses you incur operating your vehicle for business? In a previous video I went through several of the specifics of the IRS Section 179 Deduction for vehicles...and what we did not go over in that video we are going over in this one.
When purchasing a vehicle for your business you have to decide in the FIRST year of service if you will use the Actual Expense accounting method OR the Standard Mileage Rate accounting method for your vehicle tax deduction.
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Timestamps / Chapters
0:00 - Intro
1:34 - Spend LESS Money on your Vehicle
2:50 - My Example (Section 179 Deduction)
4:24 - My Example (Standard Mileage Rate)
6:57 - IRS Section 179 Deduction - is it for you?
8:53 - One last tip!
ABOUT ME 👇
I've been involved in people's financial decisions for 15+ years (7 yrs Real Estate experience & 8+ yrs as a former Financial Advisor)...I now bring the financial successes, mistakes, failures, and best financial habits/tips to you through these videos.
My mission is to bring Financial Awareness to the forefront of your daily decisions so you can: improve your quality of life, increase your net worth, and grow upon your financial literacy. My videos are a reflection of my real-world experience as a real estate investor, stock market investor, student of finance, entrepreneur, and of course...my experience as a Former Financial Advisor.
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➡️ Standard Mileage Rate vs Actual Expenses (Section 179 Deduction): th-cam.com/video/RwlvJOhnF2U/w-d-xo.html
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hi . great video . my question is can i switch my actual expenses method to mile method expenses next year. thank you.
Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
@Tyrell-rr However, if you do not have access to a professional like JUDITH ANN PEACE, quitting your job to focus on trading may not be the best approach. It is important to consider all options and seek guidance from reliable sources before making any major decisions. Consulting with an AI or using automated trading systems can also be helpful in managing investments while balancing other commitments
@Tyrell-rr Judith Ann peace is her name
Lookup with her name on the webpage.
@Tyrell-rr You are welcome
This is great content. Very well done, thank you!!
@Elsa Duty - Thank you! Much appreciated.
That spouse loophole at the end is 🔥🔥🔥.
Thanks bro. Appreciate the heads up.
@Citizen Shane - Sometimes it’s worth watching until the end! 😉
…appreciate you taking the time to check out this video and being part of the channel. Cheers!
If allowed I wonder if it also applies to parents 👀
Nice video! I'm planning to open an LLC this year and wanted to know this about car write off. I appreciate you have been very responsive in the comments.
@Sumeer - My pleasure…thanks for checking out another video! Means a lot - so thank you for taking the time. I do hope you’re able to find a financial nugget or two that helps you on your wealth building journey. Hey, congrats on making plans to establish your LLC…that is super awesome! Yeah so, if you already have a car and plan on using that for your new company/business then you’ll have to just use the standard mileage rate…however, if you do end up purchasing a used/new vehicle then you’ll have the option of writing it off or continuing to take the mileage. There’s actually another video (a vehicle deduction one) where I break down the difference between the two. So if you have more time later you’ll want to check that one out IMO. Cheers boss!
Oh, and I’m not always able to get to every comment/question, but I love interacting with folks and helping where I can. After saying goodbye to my 8-year career as an Advisor, interacting with people through the comments makes me feel like I’m still helping. Loved being an Advisor, didn’t enjoy the ‘sales’ component of what an Advisor has to do to grow their financial planning practice…so like I said, responding to comments and helping makes me feel like I’m still doing some good in the world. Lol. Or at least trying to. Thanks!
@@Financial_Awareness I'll check out the deduction one video. Thanks a lot!
been considering a model Y or model X for the business may go with the Y after this most people reccomend X for the weight
This is gold
thank you for the video..I subscribed all your videos ..very knowledgeable.. BTW is Model X or Y are qualified for 179 discount ?
Thank you for this video. I just started doing Uber and i think I will use standard mileage rate for tax deduction!
@leo1907 - That's awesome! Congrats on starting Uber. Keep learning more about taxes and personal finance...lots of great ways to save for your future and get some tax breaks as well. Good job seeking out this knowledge/info...keep it up and you'll learn more and more each year. Keep up the hustle!
Cheers!
@@Financial_Awareness Thanks so much Sir. God bless you!
I hold on to cars for a long time too. My somewhat old Mercedes is paid off, and I rack up a ton of miles on it, and maintenance is cheap.
@Todd Lloyd - Love it! When maintenance is cheap it makes it even sweeter of a deduction for sure...appreciate you, boss! Cheers!
Your awesome!!!
@Jackqueliine Williams - Hey thanks!!! Appreciate you sharing the good vibes. Cheers, boss!
i like you concepts
@erick prieto - Hey thanks man! Appreciate you taking the time to check it out. Cheers!
Thank you
Going to get more for the standard deduction if you drive a lot of miles. Especially since the mileage $ allowance went up.
Hmmmm. Sounds strange to me…$0.55 down to $0.08. Weird. Wish I knew more about the situation to weigh in better, but I’m sorry that happened to you, Wayn! I’ve used a CPA for 15+ yrs and have usually talked through irregularities like this…come to think of it I’ve never had this happen. Strange.
Great info
i've been taking the standard mileage deduction for my business mileage driven on my personal cars for YEARS....and have never known about this "straight line depreciation" which lowers your "basis" to zero. Have known nothing about "depreciation recapture" either. Neither of my tax professionals I've used (one is a CPA and the other a 20+ year IRS veteran turned book-keeper) ever mentioned this to me. I buy used cars and drive them until they are paperweights. (Honda Accord with 315k miles on it, for example before selling it off).
@gratefulRed69 - I, too, wasn't fully aware of all the specifics until I did a deeper dive/research for this video...so I'm in the same boat with you! What I was most excited to learn was that when you trade-in a vehicle (as opposed to a private-party-sale) then you don't have to worry about the costs-basis going down to zero. Also, I don't think either of our CPA's (yours or mine) mentioned this to us because IRS instructions say to just keep using the same mileage rate even after the depreciated vehicle is worth $0...so that is probably why it was never mentioned - just my guess.
Appreciate you checking out the video! Cheers!
Probably your prior CPA didn't bother because how much gain would there have been on the sale of a 315k miles "paperweight" -- are you sure they are not "clunkers?" First, you would have had to sell it at a gain or trade it in for credit. This gain would have been subject to depreciation recapture.
@Richard Di Bernardo - My Jeep has 176k miles on it...CarMax is offering me $7,500. Might be a clunker to some, but I’ve taken care of it for years.
Great video. I'm considering a Tesla. Are energy rebates available for corporate entities?
@Peter Karantonis - For Teslas purchased after 12-31-2019 - nope, but there are still credits for EV purchases. For Partnerships and S-Corporations you'll need to file Form 8936 and it is treated as a general business credit...which I'll link directly to IRS website below.
IRS Form 8936 Instructions: www.irs.gov/pub/irs-pdf/i8936.pdf
Here's an article I found that has a little more detail...
20somethingfinance.com/electric-vehicle-tax-credit/#:~:text=The%20Electric%20Vehicle%20Tax%20Credit%20Phaseout%20Schedule&text=Up%20until%20(and%20including)%20calendar,of%20maximum%20credit%2C%20per%20vehicle
Smart move
Thanks for sharing that info!
I’m a bit confuse about the 179 section since I thought that it would not affect how I choose to do the write off (standard deduction or mileage deduction). Are you sure that if I do the 179 section I cannot choose to do mileage deduction instead of standard? My plan was to use the 179 as a tesla model x, and use the mileage deduction way since I will be driven a lot (reason why I’m getting an electrical vehicle that I can charge at home with my solar). Could you clarify? Thank you!!
Thank you for making such a great video! I am a full time rideshare driver, driving approximately 40k miles a year (80% business) I used the standard mileage deduction last year and continue doing so this year. Do I have to worry about the vehicle basis at any point if I only use the standard mileage deduction? I believe that it was mentioned on video clip minute (8:43). Since my car was a lease and I bought it this year, used cars are not depreciating as much as previous years…
@Ridesharing with JC - If I am understanding your question correctly…are you putting 40,000 miles on a leased vehicle each year??? 😳
…to answer your question, this is something you should look further into. There is a back and forth debate I had with a CPA here in the comment section…you’ll just have to scroll to find it because it’s not pinned. Based on how I read the IRS instructions…you just keep using the same standard mileage rate each year as you referenced in your comment. However, according to this CPA, you’re not supposed to do that and you’re supposed to only write off the $ of the standard mileage deduction that is not allocated for depreciation. I said that to my CPA and his software system wouldn’t allow him to split up the standard mileage rate amount once he selected it…so yeah, I simply kept writing off the full amount for the standard mileage rate method. Given your primary occupation I think there wouldn’t be any red flags, but run that question by a local CPA in your area to get another opinion.
Hey, thanks for checking out this video! Appreciate you. Cheers!
@@Financial_Awareness thank you very much for your response. Yes I put that many miles however I purchased the car a few months ago. Also, since I am in the market for a new vehicle, am I able to switch from standard mileage deduction to actual expenses in the middle of the year?
@Ridesharing with JC - You’ll want to run this question by a CPA…because…my logic leads me to believe that if you drive a vehicle for 5 months (standard mileage rate method)…then disposed of it and purchased a newer vehicle for the last 7 months of the year (actual expense deduction method)…that you should be able to deduct the standard mileage for the first 5 months…then vehicle expenses for the purchased vehicle from then through end of the year.
However, my CPA told me (self employed) that you can only have one method of vehicle deduction per business per vehicle…which seems strange that you can write off vehicle expenses (including depreciation) for the newly bought vehicle, but if you do that then you can’t take the standard mileage rate deduction for the previous vehicle for the first 5 months of the year….it’s just weird to me to be honest…so that’s why I encourage you to ask a CPA because I don’t have an accurate response other than what I’ve learned thus far.
Solid Video, just learned about 179 & need to exceed 6k lbs & also to stay in the black. All i want to know is this - can you continue to take both straight depreciation & mileage deductions over many years to the point where you've exceeded the vehicles value ? Buy for 10k, write off 20k over 10 years because you drive a ton for work type situation ?
@TrainWithMD, LLC - Thanks for checking out the video. If you’ve got time, scroll through some of these other comments. After posting this video a CPA commented saying that you’re not supposed to do what you described above and what I eluded to in the video…regarding being able to take mileage deduction beyond what the original vehicle’s purchase price. From the IRS guidelines I’ve read, it says to continue to use the same mileage rate even after the vehicle has been depreciated down to $0, but the CPA said not to do that in his comments. I’m at a loss of words on this one because on one hand the IRS Instructions say one thing and other people have told me different…so in response to your question…I’d suggest you speak with a local CPA in your area and brush up on the specifics of this question. I purchased a newer vehicle earlier this year and am tracking my mileage and tracking my expenses…will hold off until next tax season to decide on which one of these deduction methods will best suit me for 2021 and beyond with this new vehicle. We’ll see. Personally speaking, I haven’t had any issues with what you’ve described and what IRS Instructions tell me to do, but I’d suggest you proceed at your own risk if you plan or end up using mileage deduction beyond the vehicle’s basis. I forget the exact number, but the “business” mileage rate is broken down between straight line depreciation and another component…so you’re not depreciating the vehicle with the full business mileage rate. Sorry for the long rant…hope some of that was helpful and not too confusing. Cheers boss!
Nope. Once you use one method you cannot change the method in the future, for that vehicle anyway.
Not gonna be a shady lady this year since they have those 87 thousand new IRS gang being hired on to go after self employed and gig workers for tax audits
I like the skrt idea at the end 😂
Just be careful of gift taxes
@Lane Kawaoka - If you have a moment, would you mind elaborating further?
@@Financial_Awareness When you gift something like that to your spouse, kid, etc technically they have to claim it as income. Now I am sure a lot of people don't do this but I would not abuse it. That said you might be able to income shift it. If I am in the 330k tax bracket and my son or brother in law is broke in the lower AGI range then they would pay less taxes than I on that gift/income.
@Lane Kawaoka - Gotchya...understood. I may have to re-watch my own video (lol) because I thought I said in that example that the vehicle would be sold for $100 and re-titled and not gifted. At any rate, my plan with my vehicle is to use it as trade-in value for next vehicle purchase so I avoid this issue altogether. However, when my buddy mentioned what he was doing I found it very interesting and included it in the video. Appreciate your feedback and response...thanks man!
@@Financial_Awareness just wanted to make sure you were aware: selling a vehicle below fair market value is considered a gift by the IRS and not a sale. So, for example if you sold a car to a family member for $100 that is actually worth $10,100. The $10,000 is considered a gift. Other than that, I really loved the video! If I ever buy a cheaper car for business I will definitely be using the standard mileage deduction, haven’t thought of it the way you put it before!
Hi another great video - I was wondering if you knew whether I could deduct expenses related to Zoom. I’ve been paying monthly expenses for Zoom on behalf of my church, as a “love offering” but I was wondering if I’d be able to write it off as a deduction (if you had a previous video on such a question, can you let me know too). Thank you so much!
@Watson Tan - Appreciate the kind feedback man. I do not have a video on Zoom specifically, but I will say that if you use your Zoom account to conduct business with your customers/clients then that would be a “cost of doing business” and a deduction against your business revenue...similar to a company needing cell phones and internet to connect with customers. However, if it is for personal use then I would say it shouldn’t be written off. Hope that helps! ...and yeah, I’ve done well with my vehicle write off for years...have gotten significantly more value than Section 179 and am pumped about it. Appreciate you. Cheers!
That is a yes
Ordinary and necessary business expenses are allowed to be deducted from income.
Are your Zoom payments on behalf of your church business related?
Totally off-subject, but is your shirt J. HILBURN by any chance? It looks great!
Thanks! Yes ma’am it sure is. I’m mostly a non-iron-wrinkle-free kinda guy, but I like to bust out the monogram shirts for fun on occasion. You’ve got a good eye! Appreciate you. Cheers boss lady! 👍🏻👍🏻
A $170k sports car driven 150k miles over the next three years would incur $30k+ on maintenance, $45k on fuel, $6k on insurance, 6k on interest. So my $170k business expense, ballooned 87k higher and i still have 74k miles more to drive to hit the original Basis. Choosing a $90k Corvette, would give me $49k in additional costs, and require 10k more miles + $3k expenses to hit the original Basis. Similarly a 30k car would be, 28k in costs to depreciate $84k.
So a used pickup $50k should work well if the maintenance is low and you use it a lot. A Luxury mall crawler for the pretty bois would not work out and need to use Section 179 and bonus depreciation to help push it down. I would have never thought of this stuff unless i saw these videos!
@Saki630 - Sounds like you're weighing all your options and making some good decisions! Keep it up, boss...well done on you. Thanks for checking out the video and channel...appreciate you! Cheers.
Question: I have a personal car I have been using for 3 year. Next year my wife plans to user this car for her business (sole proprietor) 100% of the times. How would I calculate depreciation? Do I need to sell the car to her first or can she take the estimated cost of the car from KBB and calculate depreciation via actual expense method.?
Jeep has this thing on their website about a 168(k) section & the 179 section that apparently up to 100% expensing can be "written off"
@P1NK x_o - Oh how cool! Can you please share the link? I’d love to read up about it from their website.
Thanks for checking out this video and being part of the channel! Cheers boss!
Hey first of all thank you for your knowledge, & secondly I’d like to ask you a question. I am an owner operator or independent contractor so my question is would i be able to take advantage of section 179 to get a car or truck and use it for transportation to and from my work? I’d specify though that I would only use that car to get to & from my work place. Thank you in advance 🙏🏼
@Miguel Argueta - Hey there - appreciate you taking the time to check out this video and comment. Unfortunately, regardless of the fact that you are an owner/operator the IRS has said that the normal commute to/from your primary residence TO your primary place of business are miles you are not allowed to deduct...in regards to the standard mileage rate. However, if you plan on using Section 179 (and NOT the standard mileage rate) then the qualifying factor is "do you use the vehicle for your business at least 50% of the time?" and if the answer is correct, yes, then the mileage to/from your home/office doesn't matter because you'll be writing off the actual expenses of the vehicle. If this is also going to be your daily driver vehicle then I would not recommend attempting to write off 100% of the vehicle's depreciation or expenses...and you should investigate your use of the vehicle between personal / business and only write off the business related portion of it's use...keeping in mind that in order to qualify for Section 179 you have to use it for at least 50% business use.
Hope that helps! Hey, thanks for watching the video...hope there are a few others on the channel that will also be of assistance while on your financial planning journey. Cheers!
What if.. you install a car wrap on the vehicle right after purchase. I’ll be advertising my business 100% of the time whether I’m driving anywhere or not. Then donate the vehicle after X amount of years to a family member as a write off? Thoughts?!
So business write offs lower the taxable income, or are added to the tax returns?
I'm looking to purchase a "new to me" truck for my farm. Would I be able to utilize both the 179 deduction *and* the standard mileage rate? I've been using standard mileage since I started farming but the Sec 179 deduction has me a bit confused on if I'd need to use actual costs vs standard.
Thanks in advance, great video.
@AdamtheSmus - Hey thanks for checking out the video and investing in your knowledge by seeking out this info. Well done, sir.
No, you cannot take Section 179 AND the standard mileage rate on the same vehicle in the same year….you simply need to crunch some numbers and see which one makes the most sense for you in your situation. You have to chose one or the other. In one of my other vehicle write off videos I go over which of these options makes the most sense and I think that would be a helpful vid for you to watch. I think it’s under my “self employed” playlist. Let me know if you still have more questions after watching that one. Cheers boss!
Would be nice to see a example with business income and stuff, because I’m planning to do doordash and buy a ev car
@Danilo Silva - Thank you so much for the idea! I've written it down and will start thinking about how to make a video about it...appreciate you, boss! Cheers.
You either live in Colorado or take ski vacation to Breck. Most people outside of Colorado would say Breckenridge
@Mike Davis - Have been to Breck multiple times and love it there. So many great slopes & mountain ranges to choose from across the Rockies. Thanks for checking out the video and being part of the channel. Cheers!
Hey great video, Subscribed to your channel! Question for you, I currently do deliveries and rides with Doordash/Uber. Im also working on my Real estate license here in NJ. I was planning to form an LLC and my goal was to purchase a Rang Rover for business use. What would you recommend I do to take advantage of the tax code? Buy it outright, finance it, or lease it?
@Cmendoza24 - Doesn’t matter how you pay for the vehicle - you’ll still get the write off. The purchase price write off doesn’t change based on payment type of the vehicle, but if you finance it and incur interest then those interest payments can be a write off as well.
@@Financial_Awareness thanks for the quick reply. I would definitely have to purchase it under the LLC right? Or would it be ok to purchase it under my name and claim it for busi ess use? Sorry to pick your brain so much. Greatly apprecaite the info!
@Cmendoza24 - In my opinion, the best thing to do is put it in the name of the business since you are planning to form the LLC anyway. Since it’s a business use vehicle that’ll help keep the liability tied to the business and not you personally. However, that said, myself and plenty of other self-employed folks just have it in their own name and it all works out just fine that way too.
No worries, happy to help however I can…feel welcome to check out other vids and reply and I’ll do my best to respond - in a timely manner if possible. Cheers! 🤝
Can you recommend any good CPA's?
Interesting. I took the standard mileage on my f250. Had it about 3/4 years now and just fixed her up real nice...... hoping to get 10k out of it. I only owe 7k, purchased for 21k.
@LightGesture - Sweet! After owning 6 Jeeps I just sold mine for $7,500 and was shocked I got that much for it...just bought my first F-150 and am loving it. Hopefully you'll get more than $10k out of it in this market that vehicles are in now. Fingers crossed for you! Appreciate you checking out the video. Cheers!
Amazing video! I have a question, do you think it is possible to get a 179 write off for a business that is solely online? I sell subscription services for information related to the stock market, I could say that I meet clients physically to try to get their sale onto my program which offers monthly or yearly subscription, thanks again!
@Patchy - Yes, it is def possible to utilize Section 179 for a business that is solely online. Strong recommendation to go through a CPA so you claim all the correct deductions in the proper way. You'd have to justify using this vehicle for at least 50% 'business use' in order to use 179...so if you cannot justify that percentage then you may be forced to go the standard mileage route and simply write off only those business related miles. Food for thought there.
Hey though, thanks for checking out this video and the channel...really appreciate you investing in your knowledge by making the time to do that. Cheers!
So how does this relate to the standard deduction? Are these write offs on top of that?
Awesome videos! If I have two vehicles for my business. Can I put one standard miles and the other 179?
Because I bought one cash last year for 9k but I also put like 25,000 miles in the other truck.
If I use section 179 on a vehicle and deduct the full price, can I use standard miles the following years or how does that work? Thanks
@Cubano 323 - What’s up, el jefe!
Yes, you can have one vehicle using the standard mileage deduction and another that uses actual expenses/section 179.
Switching back and forth between actual expenses and mileage deduction is only allowable (based on my understanding) IF you choose the standard mileage rate for year one…then after that you can run the numbers and select whichever gets you the most bang for your buck.
Here is a link to Turbo Tax for more info on this topic: turbotax.intuit.com/tax-tips/self-employment-taxes/standard-mileage-vs-actual-expenses-getting-the-biggest-tax-deduction/L0wIEUYhh
Additionally, I have another video where I outline the difference between these two options…you may have already seen it. It’s the one with yellow and red on the front thumbnail.
Hey, thanks for taking the time to check out this video and being part of the channel. I appreciate you. Cheers, el jefe!
Kind of an unrelated question regarding 2021 taxes. Do you think the IRS is going to do anything to delineate COVID related retirement withdrawals (CARES Act) so that they do not count towards AGI for the upcoming stimulus bill? In other words, to help prevent those CARES Act withdrawals from pushing them over the edge of income limits.
@Brian Goldstein - Such a great & detailed question - well thought out. In my opinion, no, I do not think that a CRD (Covid-Related Distribution) will be excluded from AGI for stimulus bill purposes. Great question, but nah...don't think that would happen....tbh though....so much has happened in the past 12 months that it wouldn't surprise me if the government did exclude it. LOL.
@@Financial_Awareness Ok that makes sense. I might have sabotaged myself a bit by filing "early." I pulled from my retirement last year under the Act and it looks like it might put me over the income limit for the third stimulus. I wish I would have submitted the filing a bit later! Haha
@@BJGoldstein84 - One idea...if you POSSIBLY have surplus cash on hand then look into making an IRA contribution OR a possible repayment back into your retirement account from where you took it to reduce your taxable income for 2020. Might not help a whole lot, but just a thought....and if you've already filed then you're done....because you have until April 15th OR until you file to make prior year contributions. Hey, we live and we learn...hope you're fairing well through all this madness...appreciate you being part of the channel, boss! Cheers.
Started business in 2020 bought minivan in 2020 started using it right away for the business . Will I me able to right off almost 22k toward business expenses. Use it for about 80percents of business and 20 percent for personal. Hope you can help ty. I live in ARIZONA if thats is a factor
Question:
is there a limit on the standard rate mileage deduction in terms of how many miles you can write off? I DoorDash full time 7 days a week and do about 75,000k per year. Say I buy a car for 28,000k in theory using the standard milage deduction for 2021 I could write off 42k in one year in this case? Or does my gross income affect this/ give this deduction a cap?
@Erik Nelson - I am currently not aware of any cap on the amount of mileage that you can deduct. This is one of the main benefits I’ve experienced in utilizing the mileage write off vs the section 179 vehicle deduction along with actual expenses. Upon reviewing the IRS documents for the making of this video it even says in black and white...even if you’ve depreciated your vehicle down to $0 the instructions say to continue to utilize the full standard mileage deduction rate.
Only thing I’d be careful of is writing off too much...because when you go to purchase a house and get a mortgage they’ll look over your expenses as someone that is self employed...you’ll need two years worth of tax returns in order for the lender/underwriter to have a good understanding of your average monthly / annual income...if you write off too much it could impact your ability to get a mortgage. Other than stuff like that, I try to write off as much as I’m legally allowed in terms of the tax code.
Appreciate you taking the time to check out the video...cheers, boss! 👍🏻
Hello, you might have answered this in the video but I could not find it, but, if I buy a car for business use, but most of the miles are from personal use (school and main job) would it be the same for a 179 deduction or would it be different?
@TSE - My understanding is that in order to use Section 179 you have to use the vehicle for business use at least 50% of the time. With the standard mileage deduction I am not aware of that being the case…so you might want to use standard mileage rate deduction.
Hey, thanks for taking the time to check out this video and being part of the channel. Cheers boss!
Are stock investors who trade part-time while working full-time jobs allowed to use this tax deduction when purchasing a new car, and having the stock investing act as their "business"? Thank You in advance.
@John K - Nope. Capital gains and dividends from stocks are not the same as “earned wages” and you cannot write off a car purchase to offset those...different line item on your tax return. Please feel welcome to confirm this with a CPA. Appreciate you taking the time to check out the video...cheers boss!
How would this apply to a touring musician purchasing a sprinter van to haul all of the musical equipment to concerts in which some cases shows do not always generate a profit?
@Enceladus Official - In my opinion, the situation you describe would best benefit using the standard mileage deduction. However, if your sprinter van is expensive or you plan to purchase vehicles frequently (every 2-3 years) then using Section 179 to depreciate your vehicle purchase quickly then that may be a better way to go. Best answer: track both your mileage driven AND vehicle expenses (including the purchase) and share all this with your CPA so you can make the best possible decision for your situation.
Thanks for checking out the channel & this video. Cheers, mate!
So you can write off a percentage of 179?
Question: I own a business but I'm still trying to actually get clients. Could I still write off a brand new truck under Section 179 with little to no business related income yet?
@Bruh Yota - You can’t use Section 179 to generate a loss. If you use standard mileage rate deduction method then that goes on your Schedule C and that deduction along with other business related expenses could generate a negative Schedule C, but many CPAs have advised not to have too many consecutive years showing a loss...could trigger a flag for an audit. Get that revenue up boss man! Hey, appreciate you taking the time to check out the video...cheers!
Talking about vehicles, what do you think about cciv and lucid. Do you think the drop is because of the price they are really worth? Not from the big investors who brought the share up..
@PerrGames - Hey thanks for checking out this video! Appreciate you. Yeah, I mean just a month ago the shares were trading under $24/share - so a jump that high to $60 seems like a lot of hype in a short amount of time that can only be brought on by traders pushing the stock up. I’m personally not in it and just dipped my toe in the EV market recently by buying some Tesla due to its drop over the past month. So I don’t own cciv. From an outsider’s perspective it seems as if the drop is tied to the price the pipe investors are paying and how that $15 is a premium over the NAV...because other than that there really isn’t much not to like about this spac deal. If you wanted to trade or invest in it I would monitor it through your charting and analysis to find a good entry point...then hold long term if you believe in the company’s forward looking possibilities or trade it for profit if that’s your exit strategy. Thanks for being part of the channel, boss! Cheers!
@@Financial_Awareness yeah I own cciv, Tesla was also a good one after de dip. I bought cciv yesterday just after the market opened. Expecting it to rise to $60, but I’m thinking to sell it not more than $60 because of the pipe thing that happened before. So maybe the exit is $60. Thanks for the response! Cheers!
Im 21, single filier, this year im going to make $200,000 on short capital gains tax. Been filing self employed since i was 18. I will have a tax bill around 65-$68,000. It was my dream to buy a new tesla. I dont own a car and i was really hoping to get one but now i dont think i can because i have to pya the government first over $50,000! Is there anyway for me to use section 179 to deduct 25-$45,000 write off of a 55,000 electric vehicle bought before 2024?
does the vehicle that you use for your business have to be purchased under a business name (LLC) or just buying it normally and writing it off that way? what are the benefits if any of either?
@Laura Molecavage - I believe the answer depends on how you’ve structured your business and entities. If you’re a sole prop then owning it in your name is perfectly fine...if you’ve got your business entity created already then you may want to put it in your company’s name.
@@Financial_Awareness thank you
I have a question. If I purchased my vehicle at the end of 2018 and put it in business use in 2019, how much could I write off for 2019 if its a 100% business use?
you could sell it to your business and account for it as an asset in your deductions.
So with this just deducts the tax you owe at the end of the year. So are car payments able to be written off and insurance with standard mileage rate?
@Melanin Strength
- With Section 179 you're able to write off the purchase & "actual expenses"...which would include car payment (or a portion of the car payment if you're not using the car 100% for business)...and with the "Standard Mileage Rate" method of deduction you are limited to the mileage rate per business mile driven plus a few other things I believe. This video you're commenting on is my own personal experience using the standard mileage rate - which was way better for me. In this video here (th-cam.com/video/RwlvJOhnF2U/w-d-xo.html) I do a compare and contrast of these two options.
Who could we go to...that would actuqlly incorporate these Facts
@Sir Abou - I do a decent amount of research on my own, talk to other people (that are smarter than me), and then I brainstorm with my CPA. If you have or work with a CPA then that’s who I would suggest you talk to so you can incorporate some of these into your situation if it allows. Just my two cents. Appreciate you taking the time to check out the video...cheers boss!
So I have a mobile grooming business and was thinking of getting a new truck to haul it , would you recommend the standard mileage or actual expenses?? Will be racking up miles for driving everyday
@Dmans13 - Tough to say not really knowing much else about your financial situation/business...but from what you briefly described (and my knowledge of mobile grooming businesses)...then I presume you'll have a significant amount of driving and the standard mileage rate method would be best for you when looking at the longer time horizon vs just year one of vehicle use. That said though, if you're in one of those cities/towns where it is like a metropolis and you do not have to drive very far to get from one customer to another (maybe a few blocks or less than a mile) then perhaps you won't be racking up the miles and taking the actual expenses could be more beneficial....my gut is leaning more towards you using the standard mileage rate method, but you'll have to weigh all those factors into consideration.
Appreciate you taking the time to check out the video, boss! Cheers!
@@Financial_Awareness much appreciated thank you 🙏🏼
Is there a section 179 style deduction available for cars under 6000 pounds
Great Info.
In 2024 I will be a partner in a LLC, receiving distribution and a 1099.
If I purchase a 6K GVWR SUV that will be used for 80% B-related, which is best for tax deduction
Thanks
We have a lot in common. I read somewhere the average millionaire has 7 income streams. Looks like you’ve got K-1 and 1099 already! You’ll have even more later I’m sure. Keep crushin’ it!
Appreciate you. Cheers!
could you do standard mileage rate for say two years then do section 179? or is it a one or the other kind of thing?
@My Name Is Vell - No sir, you cannot switch like that....yes, it is a one or the other kind of thing. Once you decide which route you want to go down, you're committed to doing that. However, that doesn't mean that you have to use the same method with every vehicle you purchase...you could use standard mileage with one vehicle and with your next vehicle use actual expenses.
Hey, appreciate you taking the time to watch the video...thanks, boss!
Tax time is coming again. So here’s the question. Tax guy wrote depreciation on vehicle for my taxes last year on my old Honda Civic. Well last year in April I got a new vehicle Honda Hrv. So do I have to stay with the depreciation method now or can I just se the standard deduction. Because it would be more for the mileage since my vehicle is new and I don’t need repairs.
You can make the switch in accounting methods when you bought the new vehicle. Congrats!!!
Can you place an existing vehicle you already own & place it in the new business & put in service... sorry For the simple question I'm new @ this just just started my LLC....
@pduxxx1 - Congrats on starting your LLC and taking that leap of faith! Awesome.
Yes, you can place an existing vehicle you already own and place it in the new business....but in that scenario it is my understanding that you'll have to use the standard mileage rate deduction method because you already own the vehicle and in order to be able to use the actual expense method you have to place it in service the year in which you purchase the vehicle.
Congrats again and if you've got the time I hope you're able to find a few other financial nuggets within other videos on the channel...thanks, boss! Cheers!
You seemed to ask for edification from a CPA. Accordingly, I will respond.
Transfers to spouses are GIFTS. (IRC §1045.) The donee (recipient) spouse inherits the donor's basis and would be subject to depreciation recapture upon any future sale. You can't sell to your spouse. Besides, what are you going to they don't pay you? The scheme -- to avoid depreciation recapture by "selling" to a spouse -- won't work if the IRS knows about it. The only purpose of this purported sale -- deemed a gift by law -- is the avoidance of additional tax from depreciation recapture. The scheme can be disallowed by the application of the "step transaction" and/or the "sham transaction" doctrine. If the arrangement smells bogus, it probably is -- and the IRS will trample you if given the chance.
Claiming $63,000 of total estimated standard mile rate deductions over 6 years, representing depreciation on 75% of the $24,600 vehicle cost and 75% other vehicle expenses ($15,300), results in claiming an estimated $33,075 in excess unallowable depreciation. This planning won't work if the IRS is on to you. To claim a depreciation deduction, you need tax basis (generally, your cost). (IRC §167(c)(1), which references §1014.) If you grossly abuse the standard mileage rate -- by creating $33k of bogus basis for depreciation deductions from nothing (no economic outlay), the IRS could deem your vehicle fully depreciated and disallow the portion of the standard mileage rate attributable to depreciation for all years that you depreciated your vehicle. The IRS publishes the standard mileage rates every year in a revenue procedure. They also indicate the portion of the rate that represents depreciation -- generally around 1/2 of the rate. For 2021 the amount is 26 cents per mile. You are required to reduce your basis in the vehicle for this deemed depreciation. Basis is reduced to ZERO, but never BELOW ZERO. The IRS requires a reduced standard mileage rate for vehicles considered fully depreciated (basis = 0). There is a jingle in the tax profession: "NO COST, NO LOSS."
You cite an IRS publication for authority for this treatment, which is not authoritative law. Notwithstanding your misinterpretation of the publication, The Tax Courts ignore them, and they can't be cited as law.
You may be thinking, "Opps ... I got away with it all these years -- even for years closed by the statute of limitations." Generally, the IRS has 3 years from the date the return is filed to assess additional taxes. However, claiming depreciation deductions involves an accounting method. A smart IRS revenue agent would assert an accounting method change and propose an adjustment for the full $33k of overstated depreciation for the year of the examination -- even if some of this adjustment relates to closed years.
Your position is a loser from many perspectives, including the "Pigs get fed, hogs get slaughtered" concept.
Also, in the case of property placed in service before 2016, the original use of the property had to commence with the taxpayer on or after January 1, 2007 in order for the property to qualify for bonus depreciation. So, your used vehicle placed in service in 2015 would NOT have qualified for bonus depreciation.
Mr. Scholl, please have the financial awareness that the IRS may be on to you! You can get into trouble by advising clients to take inflated or bogus deductions.
Anyone can Google me if you want to discuss this.
@Richard Di Bernardo - Really appreciate you taking the time to check out the video and for sharing your thoughts...I’ve been waiting for a true CPA professional to comment and correct any misguided info I’ve shared.
To be clear, I haven’t taken a $60k deduction on a business vehicle that cost $20k in a single year, but rather simply added up all my business related mileage deductions that I’ve received each year from taking the standard mileage rate deduction method. This was done based on my understanding of what I was allowed to do as well as receiving the blessing of my CPA each year to do so. Additionally, from what I understand from IRS website (IRS Publication 463, page 23: www.irs.gov/pub/irs-pdf/p463.pdf ) ...here is a clip that I’ve copied/pasted...”If your basis is reduced to zero (but not be- low zero) through the use of the standard mile- age rate, and you continue to use your car for business, no adjustment (reduction) to the standard mileage rate is necessary. Use the full standard mileage rate (57.5 cents (0.575) per mile for 2020) for business miles driven.”
...as you clearly mentioned the IRS website isn’t law, but rather tax code...to which I would reply with some confusion because if I’m not supposed to follow that tax code then what other source am I to research, read, and follow if not IRS guidelines and instructions? That said, from my understanding of depreciation adjustments when using the standard mileage rate deduction method, even if a vehicle is reduced down to a cost basis of zero, the instructions from Pub. 463 instruct me to continue to use the same business mileage rate despite the vehicle being depreciated. If you could shed some light and your thoughts on that I would greatly appreciate.
Additionally, I do not and did not endorse what I heard my buddy do regarding the story in the video at the end where his CPA told him to transfer ownership to his wife and to liquidate the car from that point...seemed weird to me and over complicated. Personally speaking, I’ve never done that and have used my paid off vehicles as trade-in down payments towards the next vehicle purchase.
Again, I really do appreciate you taking the time to comment and respond...I’m sure you’re quite busy given your profession. I do try my best to be accurate in my videos, but am humble enough to admit when I’m wrong or misspoke. Although I do have experience in the world of personal finance, it’s folks like you that are the true, licensed, certified professional. Thank you for what you do!
@@Financial_Awareness I know you didn't endorse the purported gift arrangement made by your friend. You clearly disclaimed. You kinda asked for clarification. I was glad to explain it.
Regarding the continued use of the full SMR with a zero basis, that flies in the face of recognized tax concepts regarding basis. I am familiar with the rue in the IRS pub. There is no substantial authority for it. If the IRS wants to challenge you on it -- especially in an abusive situation, -- they can. And I can envision the tax Court siding with the IRS. If not, I suggest keeping your vehicle for the next 25 years and also gift the vehicle to one of your kids for their use for another 50 years -- really stick it to the IRS. Years ago, the same IRS publication mentioned using a reduced SMR for a fully depreciated vehicle.
I suggest keeping in mind the pig vs. hog rule. I guess the IRS really doesn't care because the dollar amounts are relatively insignificant for most people. Also, be aware if the IRS despises you. I represented a client during an audit and assisted during Tax Court proceedings. The revenue agent lied and cheated; he withheld documents from an FOIA request. District council lied and cheated. The Tax Judge yelled at the taxpayer (she yells at everybody -- even me). If this client had this issue and the IRS was aware of it, they probably would have denied the depreciation or try to reduce his business miles to practically nothing.
If the IRS challenges the use of the full SMR for a fully depreciated vehicle, and you can't settle the examination in appeals and have to go to Tax Court, you would have to present legal argument to allow deductions for depreciation with no basis, without any reference to the IRS pub. You would need the code, the regs, and court cases. I don't think there are any.
Years ago someone followed the incorrect instructions in an IRS pub about IRAs. I don't remember the issue. While the Court praised the taxpayer for the ability to follow instructions, they reluctantly and unfortunately dinged 'em -- the pub was inconsistent with the code.
BTW, if you are going to trade in the old vehicle with the purchase of a replacement, make sure the contract gives you around $3 credit for the old vehicle and have the difference reflected as a reduction in the purchase price. You can't do a tax-free exchange for personal property anymore.
If you have any other issues you want to bounce off me, please feel free to contact me. I apologize for being harsh and over the top.
I purchased a Scion xB a few years ago for $13,000 with very low miles. At 60,000+ miles a year for business, I feel like I got paid twice-over for getting it!
I ran the numbers when I purchased the vehicle, and it was a no-brainer to take standard-rate mileage deduction. I also wrench as a hobby, so I have kept the vehicle running and looking like new. Sometimes I wish that I could write off all the small expenses, maintenance, and fuel.. but it’s so small in comparison to the mileage!
I purchased a nice f150 recently, and between its fuel consumption and price tag, I wanted to run the numbers again. I have put on nearly 30k since January and haven’t had the time to do that, though at this rate it feels like an exercise in futility to do so!
@Patrick Giyan - Dude, that Scion xB story is friggin’ epic!!! So awesome. Coincidentally, I’m actually in the market for an F-150 myself right now. Crazy how ridiculous prices have jumped.
Sorry I’m new to this but how do you determine that your using that car for business ?
@Elliott Idemudia - Each business owner / Self-employed / Sole Proprietor will need to justify their own driving as "business related" or "personal." This is determined with literally each time you turn on the vehicle...just ask yourself..."am I driving right now for business or is this a personal errand I'm running for myself?"
If you're driving to go pick up your dinner at Panda Express...just for yourself...then driving to Panda Express and the cost of that meal cannot be deducted/written off. However, if you are driving from your office TO Panda Express to go meet a client OR prospective client (or other business associate to talk business) then the mileage driven TO and FROM Panda Express can be written off. Quickbooks has a good mileage tracker and there are other good apps, too.
I live in suburbia and did not always start my day off by driving to my office (which cannot be written off...the mileage from your primary home to your primary office location)...so it was quite common for me to drive 25,000-30,000 miles each year...most of which were business, but some for personal. We also use my wife's vehicle for many of our personal needs/errands.
Like I said though, you simply have to ask yourself if you are operating your vehicle for personal or business use each time you have to go somewhere. If you ONLY have one vehicle, then you CANNOT and I strongly advise against writing ALL of it off...because that's like admitting to the IRS that you NEVER drive for personal reasons....when you only own/operate one vehicle that is a difficult thing to believe. IF you own two vehicles - one for personal and one for business - then it becomes WAY easier to justify a write off 100% of the business vehicle...because you can justify that you used your other vehicle for your personal needs. All that said, IF you only have one vehicle...then you'll need to track all your 'business' miles and only use those trips as write offs...which will be less than 100% of the time.
Does that help clarify a little bit?
Thanks for checking out the video and channel...cheers!
Hey. Great video but I have a couple questions. Say I right off the car , If I decide to sell it, What happens? I heard you have to pay for it again or something. Could explain what happens after I sell the car? Thanks!
@Karan Masson - No problem. Hope this helps...
When you depreciate your business vehicle down to $0 you’re essentially taking your “basis” down to zero as well...which is like saying the vehicle is worthless...which we all know isn’t exactly true. So, when you sell it for any amount above zero dollars you now have capital gains...which you’ll owe taxes on - for most people this will be 15% unless you’re making above $400k I believe.
Therefore, what some people do to avoid depreciation recapture is one of three things: 1). Ignore it and play the “catch me if you can” game. (Not what I suggest). 2). “Give” the vehicle to your spouse/partner and let them sell it - assuming the vehicle is worth less than $15,000 then you’re under the annual gift tax limit and you can gift it for free - then spouse/partner sells it for true market value and you pocket the money. 3). As I showed in the video with a screenshot, you can avoid depreciation recapture by trading the vehicle in for your next vehicle purchase and essentially using it as a down payment on your next vehicle.
Without really knowing what I was doing with previous vehicles, I’ve always traded in and used my paid off vehicle as a down payment on next vehicle purchase...so I haven’t ran into this issue myself in the past. I suppose a 4th option would be to donate the car, but I doubt that many people actually do that.
In speaking with other business owners, most seem to simply pay the capital gains taxes when they go to liquidate/sell the vehicle because the amount is so small (usually)...so for a truck as an example...if it gets driven to the ground and is only worth $10,000 then capital gains would be $1,500.
Lastly, if anyone else reads my response and would like to comment or confirm please feel welcome to do so...there’s power in numbers and if I’m mistaken please feel welcome to correct me. Karan, hope this was somewhat helpful!
@@Financial_Awareness Fantastic response. had the same question myself, thank you!
When u sell your vehicle or trade it in, 9 times outta 10 your car is worth much less then what you originally paid for it. Therefore you can write off the depreciation of that vehicle as a business expense/loss which will usually increase your refund (dramatically) I do this for my self employed clients all the time. Been doing taxes over 10yrs.
@Toya Thames - What if the vehicle has already been written off and depreciated down to zero though? That was this person’s original question I believe…if you already write it off and then sell it. If I understand your comment correctly, are you saying you write it off again? I might have misunderstood you.
I love CPAs and value the work you do for your clients! (And I encourage people to work with CPAs in nearly every video.) Thank you for taking the time to watch the video and sharing your expertise.
So I brought a new car in 2021, September. The dealer gave me a paper back saying it’s a rebate claim it on my taxes. I’m confused.
@Font Font - Hmmm. Will help if I can. What kind of vehicle did you buy? Was it electric? Do you live in a state that provides deductions/credit against your state taxes for buying an EV? Did you buy a vehicle that is eligible for a Federal Tax Credit?
Check out this article: electrek.co/2022/01/21/which-electric-vehicles-still-qualify-for-us-federal-tax-credit/amp/
Will help if you ask a question or provide specific details, but it’s tough to try and help you with such limited info you provided 🤷🏼♂️. Whatever the dealership gave you - save it! See if it is on that list of vehicles from that article…and def reach out to a CPA if you can’t figure it out by researching online or calling the dealership and asking more info.
But hey, congrats on your purchase! Hope you’re loving your new ride! Cheers boss lady!
So if you buy a much more expensive vehicle you can benefit more by the one year depreciation?
@suprand - In my opinion business owners should focus on putting more capital behind growing their business strategically on assets and / or equipment that will help generate more revenue...and we can’t forget that a vehicle (at the end of the day) is a depreciating asset in most cases. So yes, the larger the price of the vehicle the larger the purchase price/bonus depreciation you’ll have, but just make sure you’re not wasting hard earned money on a vehicle that isn’t necessary when you can get by on less. I know a guy that’s has had his business for the better part of 13+ years and in the beginning he kept his business expenses smaller so he could focus on remaining in business and hiring more people...now...13+ years later he just bought a $100,000 truck for his business and wrote it all off in year one. IMO, that’s something that you can build up into as your business scales and gets bigger. Just my opinion.
Appreciate you taking the time to check out the video...cheers!
For clarification: are you saying the rule is, if in purchase year one takes (your example) the 75% using Section 179; the subsequent years one cannot take the Standard Mileage rate for business miles driven each year?
IOW, does taking Section 179 exclude you from using Form 4562 to take the standard miles rate any year after taking Section 179 Deduction?
This comment sure could use an answer
@@driftaway2806 I will ask the NSTP Q&A support for members 😂😂😂. Your comment let me know I’ve waited long enough.
@Drift Away - @robwin007 - Yo! What’s up good people. So listen, lol, I think if you scroll my comments you’ll see I get to about 87% answer rate with most of the questions these vids get across my channel. Can’t get to them all. Sorry if you felt like I ignored you. 9 months ago I was busy and this one slipped through the cracks. 🤷🏼♂️
This might help: ttlc.intuit.com/turbotax-support/en-us/help-article/self-employment-taxes/switch-standard-mileage-rate-actual-expense-method/L05t6uiEo_US_en_US
Once you start with actual expenses you have to stick with it. With standard mileage, you’re allowed to switch from that to actual expenses - this allows you to take actual expenses, but that does not include purchase price depreciation because is only allowed in year one.
Hope that helps! Sorry your question slipped through the cracks. The demand to answer felt weird, but whatev. I’m pretty weird myself so I try not to throw too many stones. Cheers!
@@Financial_Awareness So, as a way to remember, I will use the mnemonic {A} you stay, {A} for Actual; {S}tandard Expenses, you can {S}witch.
Gotcha.
Kind Regards.
Oh so cool! Great way to remember! Thanks again for checking out the channel. YT is the only social media platform I allow notifications to come through on my phone…so I’ll try to be better about responding faster if you post a question again. Thank you for chiming in and asking your question. 👍🏻😃
I’m curious if their has to be a certain amount your business has to make? I run a ebay store and use my vehicle for many of the tasks to do so. I do get a tax break now with it but I’m curious if something like that would qualify for 179?
@Crazy Cabin Couple - Yes, you are correct! Bingo. Your business has to pay enough in taxes in order to fully take advantage of this deduction/write-off. You cannot use Section 179 to generate a loss.
Quick/general example…if a business has a net tax liability of $20,000 (amount of taxes you owe) & you buy a $30,000 vehicle you cannot use 179 to generate a $10k loss by writing off the entire vehicle in year one. Hope that helps!
Hey, thanks for taking the time to watch this video and being part of the channel. Cheers & congrats on your successful ebay business!
@@Financial_Awareness any idea how much? Is there a certain limit you have to make per year for your company?
@Crazy Cabin Couple - There is no revenue minimum. Just have to have a tax liability.
Another example, you could be self employed filing a Schedule C and have $10k profit and write off $10k vehicle purchase….OR file as an S-Corp with $400k revenue & $390k expenses…leaving you with $10k profit which would allow you the ability of writing off a $10k vehicle…meaning that size of revenue doesn’t matter…just cannot use section 179 to generate a loss. Sorry if you’re still not getting it, I’m running out of examples. Lol.
Consulting with a CPA would also be helpful.
@@Financial_Awareness yeah it’s Chinese to me. I probably will have to construct with someone like you had said. I’m just not sure if I qualify. I make random amounts per year ect. I just figured it was a good excuse to get a larger truck if I were able to get some sort of money off of it.
@Crazy Cabin Couple - No worries! Just keep learning a little bit each day/month and your knowledge will compound.
For example, if you only have $10,000 of income/profit for your business…you won’t be able to take a $35,000 truck and write it off entirely in year one…there simply isn’t enough income to offset in that example. In which case, you’ll write off the vehicle (aka depreciate it) over several years instead of all of it in the first year with bonus depreciation.
Does that help make a little more sense? Don’t get frustrated about all this financial lingo…takes time to understand it all. You got this!!!
Can this tax write be done if you have a business in the US and live overseas but you want to purchase the car and ship it to the place you reside? Will you still be able to get the same privilege??
@Robekah Lindsey - Wow, such a great question! I’ve never had to think about that as a US based resident myself. After a quick Google search many of the results and articles I just read are regarding driving/commuting for business IN the United States...so I’m going to lean towards that being my answer, but I think you should check with a local tax professional in your area to confirm. Hey, I appreciate you taking the time to check out the video...cheers, boss!
@@Financial_Awareness thanks for responding so promptly... appreciate it
I started a business this year in the trucking industry, I got my LLC and get pay 1099. I made $70k this year. Can I purchase a heavy duty truck and get the 179 write off benefit? Also if I buy the truck in the beginning of 2022, can I use it for this years tax Break?
-thanks
@Elias Valenzuela - Hey congrats on starting your business AND generating a profit! Awesome!!!! I’m super happy for you!
As I’m typing, it is Dec 30th…so you’d have to run out an buy this heavy duty truck like tomorrow in order to get the tax write off for 2021’s revenue. ….annnnnnd…heavy duty trucks aren’t cheap in this current environment we are in. So I hope you get a good deal!
If you buy the truck on Jan 1st then it would be a deduction for 2022…and it would not be an allowable deduction against 2021’s revenue.
I’m super curious if you’re actually going to do this and buy a truck tomorrow…lol. If you’re on Twitter, send me a DM with a pic of the truck…would love to see what you end up buying. I purchased my first truck this year after going through six Jeeps since buying my first car. Have loved modifying it here and there…kinda became a truck guy this year. Lol.
Hey, happy new year el jefe! Cheers!
What do you mean by placed in service or should I say how do you do that?
@Survival EQUALS Life - My apologies for using those specific words...that's the language the IRS uses. It quite simply means: you bought it...and started using it. LOL. Yes, it is that simple.
Thanks for checking out the channel and this video...appreciate you! Cheers!
Better to get a 80k 7000 lb auto for the business and write off or 60k 5000lb auto for personal ? Which is the better deal ?
@rbb1111 - Great question and I think it depends on the situation. How many miles will be driven on these different vehicles? Also, I’m not aware of someone’s personal vehicle purchase being able to be a write off…has to be business related somehow.
Hey, also, I started sharing more financial thoughts on some various topics in a daily financial vlog-style format while driving my F-150…would love for you to check them out!
Here’s the first one: th-cam.com/video/vLL78VPT_O8/w-d-xo.html
Hey brother my wife and I just started a hauling removal company and we're looking to get our LLC in the next 2 weeks. Unfortunately the truck was in a wreck but I was wondering without having an LLC prior to that can I still write off repairs on the vehicle? (From your opinion)
And one more question sorry brother. If I'm financing a vehicle would I have to pay it off in the same year to take advantage of the section 179 or The mileage benefit?
@Jcub RAY - Thanks for taking the time to check out this video and the channel. Much appreciated!
1st question - in my opinion, yes, the repairs could be a write off. However, because you already owned the vehicle before you started the LLC it is my understanding that you will not be able to do bonus depreciation in “year 1”, but those repairs / expenses should be allowed. Logically speaking, in order for you to use the vehicle for work it has to be repaired…to me that means it is business related. Keep in mind you have to use the vehicle for a minimum of 50%…any amount of driving less than that and I would recommend using standard mileage deduction.
2nd question - no, you do not have to actually pay the vehicle off in order to get these deductions / write offs.
Thanks for checking out the channel! Cheers!
So if I finance a 60k truck what would be the final price I will paid with any write offs?
@tu papi - Not enough information to accurately answer your question. Sorry boss!
Does one has to deduct the mileage for tax year in question or mileage from time of vehicle purchase till date..be well.
Depends on when you purchased the vehicle and started putting it in use. You may only count business-related driven miles during the calendar/tax year in which you are filing your return. Most people right now are filing their 2022 tax return, so those folks are only using miles driven from Jan 1, 2022 through Dec 31, 2022. If you owned one vehicle, sold it last March…and assuming you continued driving your vehicle for business related purposes…then you would need to count miles driven on your older car and miles driven on your new one…but only for 2022 calendar/tax year. Does that make sense?
How do I start organizing my business expenses??? I plan to buy a car now and later become self employed..can I still use all those expenses as business expenses?
@Brittany Smith - Hi there! Best thing I could recommend is to create a new Excel spreadsheet and make a business P&L (profit and loss) statement...just keep it simple and list all your different revenue streams and then list all the expenses needed to operate and run your business. I think I go over that topic in one of my other videos...the one about self employed taxes & tips.
Regarding your vehicle deductions - if you're using Section 179 and writing off the purchase and expenses then you'll need to do that starting this year (the year in which you purchase the vehicle AND place it in service for your new business). If you're referring to taking the standard mileage deduction then you need to simply start tracking your business related miles driven.
Hope that is helpful! Congrats on making a few moves to better yourself. Appreciate you taking the time to watch the video. Cheers!
Brittany, it costs nothing to form an LLC and get an EIN... form the LLC in your state first and get an EIN and start putting the expenses against your business on day one.
I’m doing instacart as a side gig when I’m not working my primary job. Can I get that midnight black Mercedes G Wagon and write 75% of the cost off as a business expense?
If you generate enough in revenue through your business, yes. I’m not kidding.
It would be stupid (financially speaking), but stupidity is still legal in America. Lol.
Congrats on the work ethic…love the hustle!
So inspirational man, Johnny sins went from police officer to doctor to a accountant
@Nathan choo yick - 😂😂😂😂😂😂😂. He’s multi-talented! Where’s my nurse assistant??? Lol
Who’s Johnny SINS? ::looking around::
He looks like a police officer.
Wouldn’t it make sense to use section 179 every year? You get a car once every year? Thanks
@Sham Bhai - From what I understand in speaking with my CPA and a few others...you don't want to take this deduction every year. However, some business owners (like a landscape business owner for example) ADD vehicles to their fleet as their company grows...so in that circumstance...as you add more vehicles to your existing fleet then yes, you could take the Section 179 deduction each year.
For most self employed individuals (where their business is literally just themselves), I've been told the safe bet (to avoid getting red-flagged for an IRS audit) is to only take this write off every 2-3 years...with an emphasis on three years.
Hey, thanks for checking out this video and the channel...really appreciate you! Cheers!
For the standard mileage method, does the vehicle need to be 6,000+ lb gvw like it does for Section 179 Or could i do this with a smaller vehicle like a Toyota RAV4 or Camry. Thanks!
@Oops Woops - Correct, doesn’t need to be 6,000 gvwr for standard mileage deduction. Great question! Appreciate you taking the time to check out the video...cheers!
So are you saying that if you do the standard milage method, then you can not use the "over 6k lbs 100% 1st year" ..? I was thinking you could use both..but I'm not a tax person lol
Lol. Not laughing at ya…laughing with ya there at the end of your comment.
Can’t use both…one or the other. Standard mileage is just mileage…so that works best if you use the vehicle for less than 50% for business use. Also, if you only own one vehicle then you should never write off 100% vehicle expenses…too big of a red flag to Uncle Sam.
Sorry for the delayed reply…been busy livin’ and not making content. 😎
Cheers!
What about 3yr leases?
@Un Bezo - What about them? Yes, even if you lease you can write off expenses…but because you don’t own the vehicle you cannot depreciate it.
have you ever had to sing a Terms of Use Agreement and influencer agreement.pdf ?
@Castillo Grows - Nope. TH-cam does have a Partnership Program that content creators have to sign and agree to in order to publish videos and be paid, but that’s about it.
What are you referring to?
So if I don’t drive as much I should opt for a more expensive vehicle and take the 179?
In my opinion, that is a better strategy if mileage is less…be careful though because you don’t want to overspend on more vehicle price than you need.
Great info. I'm thinking of a 2017 model x for 65k and use the section 179 with a 25k deduction + the bonus depreciation. What do u think?
@Roger Chan - What an awesome car! I remember growing up and my brothers and I would say, "Punch buggie!" and hit each other on the arm every time we saw a VW beetle...for my two daughters - it's Tesla cars! hahaha. I think that's an awesome car and I just bought some Tesla shares the other day on the dip. Great company, great vehicles.
I put my thoughts into this video and two others when it comes to taking actual expenses vs standard mileage rate deduction methods. For me, living in suburbia it has made complete sense to take standard mileage deduction. However, if the economy continues to trend towards more remote work & work from home then I think there will be a growing trend towards less miles driven and thus better to take Section 179 with bonus depreciation as a better write off. However, all that said, my best response is that it depends on your situation whether to take actual expenses & vehicle purchase write off OR standard mileage deduction...at that price point I would argue writing off the vehicle purchase and actual expenses makes more sense than a $35,000 car that will be driving for 5+ years for 100k+ miles driven.
Hey, appreciate you taking the time to check out the video, boss! Cheers!
I’d like to purchase a Mercedes G Wagon for my grocery shopping gig. Do you think I can write that off for business?
@Heaven Marie - Hmmm...sensing some sarcasm. lol. Do grocery shopping gigs pay that well that someone could afford a G Wagon? 🤔
@@HeavenNY I’m ordering a 2022 G550 tomorrow. Company car
@@bebin73 nice! What’s your old car? Can I have it? 😁
Can you help me understand the math of your fuel cost per mileage? 150k miles @ $10.8k is a bit less than 13.75 miles per dollar. Even if gas avg'd $2 across those years (it didn't) you would've needed to avg 27.5mpg in that jeep grand Cherokee (it wouldn't). At $2.50...34+mpg. That jeep prob avgs 19 to 20 if you drive like a granny...
What SNES game is that in the background?
@Mansur Zahir - NHL '94...one of my favorites! My youngest brother and I play it each Christmas...we have a trophy and lots of bragging rights/pride on the line. LOL.
Hey, thanks for checking out the video and channel...really appreciate you. Cheers, boss!
From what I understand, if you take the deduction for the vehicle, you cannot try and sell the vehicle for $100 and try to get around owing the taxes. The vehicle must be sold for fair market price.
Hey Bobby! Wasssup man! Thanks for checking out the vid and channel. My apologies for replying so late after 3 months. Lol. Question, do you by chance have a link to where it says you have to dispose of the vehicle at fair market price? I’d love to read that info so I’m better prepared for next time the question pops up…I haven’t read that yet. How did you come to this understanding?
I don't think I can convince my clients to drive a Buick for the purpose of enhancing their business.
LMAO
Can I lease a Tesla Model X and my business partner gets the F150 and Both get the deduction and I get the EV credit?
@Victor Tokarev - My honest, gut reaction is...yes, I believe you can. However, it would be best to establish a relationship with a CPA in your area and ask them / confirm with them questions such as this. I love my CPA and fully support people with more complicated tax returns / businesses to work with CPA's. If you pay attention to what they say then you can learn quite a bit each year they help you file.
Thanks boss...appreciate you...cheers!
Dave Ramsey is wrong. Go price an old Cessna 182 compared to a couple years ago...
@Mark - Oh man no doubt there are some awesome exceptions to his quote...I’ve got a buddy that’s flipped super cars for profit. I don’t disagree with you...his quote though is geared towards his audience that buys “normal” cars, 4-wheelers, jet skis, basically most things that have an engine depreciate in value because they get used so much and ran into the ground from wear and tear. Dave isn’t wrong - he’s simply educating his audience not to spend too much money on “normal cars” that depreciate in value. I don’t think the “average Joe” is looking into purchasing an airplane from a few years ago that’s appreciated in value - LOL.
Personally, I don’t take his quote as literal. ...and it’s more geared towards encouraging people not to spend $700 on a car payment when their take home paycheck is only $1,176. Hey, appreciate you taking the time to check out the video! Cheers boss!
Hi I just talk to hr block, the lady confused me... If I buy a car over 6,000 pounds I'm a sole proprietorship, say I paid $80k, & don't owe the irs and I use 179 accelerated depreciation within the first year, when I file my taxes will I get the full 80k back returned into my account? Car use 100 % for business
@Candace M Smith - Just replied to your same question on the other video.
@@Financial_Awareness which video?
@@realtalk8346 - I believe you first commented on my first vid about Section 179, then commented on my more recent vehicle deduction vid, but I was referring to this one: th-cam.com/video/RwlvJOhnF2U/w-d-xo.html
Why cant you write truck off AND deduct your milage? Im sure you can
My wife and I need a Tax/CPA professional for both our business /my job. Are you available?
@therealharponeus - My goodness that is so kind of you to share, but nope, I’m not a CPA and am not able to help. You got this! Just keep learning and watching vids…once this stuff clicks you’ll get it.
Why can't we do both?
@Michelle Beckford - It's an accounting reason...can't do both during the same year. In the first year of buying the vehicle and starting to use it you have to decide which one of these routes you want to take (actual expenses or standard mileage).
Eventually, you can switch back and forth each year depending on which method gets you the most value. Here is a snapshot from the link below...
"If you want to use the standard mileage rate method, you must do so in the first year you use your car for business. In later years you can choose to switch back and forth between the methods from year to year without penalty. Each year, you’ll want to calculate your expenses both ways and then choose the method that yields the larger deduction and greater tax benefit to you."
turbotax.intuit.com/tax-tips/self-employment-taxes/standard-mileage-vs-actual-expenses-getting-the-biggest-tax-deduction/L0wIEUYhh
Hope that helps!
Can I write off a vehicle under 6000lbs if let's say it was used for business 100%?
@OnLun799 - Yes you can...just not as much as if it was over 6,000 lbs.
If it's a $30k truck and I only drive about 3,000 miles per year, am I better off doing actual cost method?
@funkyfreshEazyO - How many of those 3,000 miles are personal? How many are business?
If 100% of those 3k miles are for a legitimate business use then I would say this is possible, but you’d have to really document how/why - as most vehicles being put to use get driven more than that…not saying it’s a problem, but I’d allow a cpa to confirm with more certainty for your specific situation.
Hey, appreciate you checking out the channel…I recently started sharing more financial thoughts on various topics in a daily vlog-style format while driving my F-150…would love for you to check them out man!
Here’s the first one: th-cam.com/video/vLL78VPT_O8/w-d-xo.html
@@Financial_Awareness 100% of those miles are business.
I have a small home inspection license and company. Just getting started on the side.
I have $100k w2 and I'm considering getting a $30k-$50k truck for the business and writing it all off on year 1 to lower my w2.
Wouldnt that be way more advantageous than writing off only 3k in miles every year?
#1 - congratulations! That’s incredible to hear you venture off like that. If you haven’t heard it yet…I’m proud of you for starting. That’s pure awesomeness.
Sadly, with respect, you have it wrong.
You’re not allowed to purchase a vehicle and write it off against your w-2 earned income. If you have $30,000 of home inspection revenue
(at $400 a clip that’s 75 home inspections…how many are you doing on the weekends?)
…and you write off 100% then your business broke even and you’d owe no taxes…you’d still have to pay taxes on your w-2 though.
You’re learning! You’re doing great…keep watching videos. Mine or others…mine are good, but there are plenty out there.
@@Financial_Awareness I only had $2k in home inspection revenue, so if I bought a $40k trcuk I'd write $38k off my w2 income.
Wouldnt that be better than writing of 3k each year?
I do not believe you read my last comment.🤨You have to think of YOU as different from “your business” - they are not one and the same.
YOU earn a W-2 living wage - and are not able to write off a vehicle…you’re not an owner, you’re an employee.
“Your business” = Home Inspection for you = something you own. This thing you own generated $2k worth of revenue…you may not write off a $30k vehicle against $2k worth of revenue. It is simply…not allowed. As I said, you’re still learning…keep watching videos, keep reading articles…learning is healthy.
🤯
Nice, even just the depreciation portion will be more than the cost of the car itself - has Uncle Sam given you a visit yet? 😏
@Tushar Prasad - Uncle Sam is my buddy! 😃 Although it is difficult to understand at times, all of Uncle Sam’s instructions are public knowledge - just gotta know where to look.
I believe I included a screenshot directly from IRS website regarding the instructions to continue to use the same standard mileage deduction rate even after the vehicle has been depreciated down to zero. Same with the depreciation recapture remark regarding using that vehicle as a trade-in instead of a private party sale...thus helping to infuse some business into the automotive industry. Clear indication that the tax code favors consumption in the automotive industry.
Appreciate you taking the time to check out the video! Cheers!
@@Financial_Awareness Please be advised that "Uncle Sam's instructions," IRS publications, and website information are not the law. You can't site these sources as law in Tax Court. Reliance may be sufficient to waive the §6662 accuracy-related penalties if you lose. That's about it.
Where in the tax code section(s) did you find "the tax code that favors consumption in the automotive industry?" Maybe the code promotes gas consumption. The code favors big gas guzzlers, not general consumption in the auto industry. Yep .... those lobbyists for SUVs! What about a Honda Accord? Na, too rational of a vehicle choice, and the ticket price is too low.
@Richard Di Bernardo - Hey Richard! I had a lengthy response to your other comment, so I’ll be shorter with this one...I didn’t read anything in the tax code that said the tax code favors automotive consumption. I was merely sharing my opinion because I read this, “When you trade in an old car for a new one, the transaction is considered a like-kind exchange. Generally, no gain or loss is recognized. (For exceptions, see chapter 1 of Pub. 544.) In a trade-in situation, your basis in the new property is generally your adjusted ba- sis in the old property plus any additional amount you pay.”
I may have interpreted that incorrectly because I took that as meaning that if you have depreciated your vehicle down to zero and receive say a $7,500 value on the vehicle as a trade-in to purchase your new vehicle that you would not owe any cap gains on the $7,500...hence my opinion of thinking that there might be a benefit to trading in a depreciated vehicle to purchase a new one, therefore stimulating the automotive industry. As I mentioned in my other comment, I’m willing to admit when I’m wrong or if I’ve misspoken. My intent is not to deceive or share wrong information, but rather shed light on confusing topics - even if I’m needing to admit when I am wrong. Hope that makes sense. Thank you for taking the time to view the video and channel. I appreciate you, boss!
make a new video about this again
@erick prieto - As of now I do not have another vehicle vid on my radar, but will prob do another one at some point. Is there something specific you're looking for that wasn't covered in this video or any of my other 2-3 vehicle tax deduction vids? Thanks!
Lol. Not allowed to sell to a friend or relative or anyone else for a BS price to skirt around paying the correct sales tax. Even if you weren’t doing it for depreciation purposes. I know that because hasn’t everyone bought a used car and asked the seller if they can write a low selling price on the bill of sale lower than what you actually paid them to save on taxes? And I believe they save too by saying they got less $ for the vehicle. It’s a win win for the seller and the buyer. But the IRS doesn’t like to the the loser. And they are the losers on those under the table deals.
@Heaven Marie - Keep scrolling through the comments...I think someone else mentioned that selling to a spouse (or someone) could be considered a gift (assuming the sale would be under $15k gift tax limit). At any rate, I usually pay off each vehicle then use some cash and the paid-off vehicle as “down payment” on the next vehicle we purchase...from IRS website I read that when you trade it in you don’t have to worry abou my depreciation recapture. So that’s what I normally do. Appreciate you taking the time to check out the video...cheers!
@@Financial_Awareness There is no $15k gift tax limit on transfer to spouses; there is an unlimited exclusion for inter-spousal transfers. Also, no gift tax return is required for any inter-spousal transfers. Additionally, §1031 tax-free exchanges no longer apply to personal property (a vehicle) anymore.
Sweet! Good to know! Thanks