Depreciation Of New Vehicle Used In REI
I am about to purchase a new vehicle that will be used 75% of the time in my REI program. I wanted to know how much tax advantage could one get by depreciating the vehicle or taking standard mileage? I would be able to depreciate at least 5,400 the first year the vehicle is placed in service. What do you all think?
Saw a special on 60 Minutes, 20/20 or one of those shows within the past few days that had an interesting interview about tax breaks for companies who purchase large trucks..
Seems Washington cut a deal with Detriot, I'm not sure if it's for all companies for just "Professionals" ie. Dr.'s, Lawyers, Real Estate Agents, they mentioned only these 3..
Anyway... if a company purchase either a Ford Excursion or a Hummer... Washington would give that company who bought one of these large gas guzzling vehicles a $100,000 Tax Break for the company... I now know why I see more and more real estate agents buying the Hummer and advertising their business on it...
$100,00 tax break if you buy a gas guzzler, wtg Washington, amazing to me
MT
[addsig]
Vern,
Before you purchase the vehicle consider the benefits provided by the new tax laws enacted in May for vehicles over 6000 pounds.
The $330 billion tax-cut package raised the deduction for business equipment from $25,000 to $100,000. It was originally intended to help farmers and ranchers buy pickup trucks. But the evolution of sport utility vehicles, considered light trucks, opened the way for other business owners to claim the deduction.
Under the new law, up to 100% of the purchase price can be written off in the first year of ownership ,if the vehicle costs less than $100k (minus personal usage). If you have significant gains, or are looking to carry forward a loss into future years, this is a better way to go than just writing off the value of a car.
There are a great number of SUV's that qualify including the Navigator, Expedition, Excursion, Tahoe, H2, etc. and many involved in REI can use the extra space afforded by these big vehicles.
mcl,
the interview stated that they no longer allow expeditions, explorers, mid size suv's... they said since it was raised to 100,000, only the 2 biggest vehicles made would qaulify for the tax break.. excursion and hummer...maybe they were wrong..
MT
[addsig]
Any vehicle over 6,000 pounds qualifies. I'm not an accountant, but I have a very good one and he has had me in this for several years, from back when it was only $25,000 per year. He wants me to buy another this year to get the higher tax savings, but I just bought a navigator last December, and I don't need two.
I would post some URL's, but they'd probably be blocked. Do a google search on SUV tax write-off and you will find a number of articles on it.
Thirty-eight SUV models qualify.
[ Edited by mcl8190 on Date 10/15/2003 ]
Hey thanks mcI8190 and MikeT1013,
Great insight. I was under the impression that in order to get the full amount depreciated one had to purchase under a C-Corp for this benefit.
Also I am just a small fish at this point. I have been investing for the past 18 months and only clear 24k per year from I REI, however I over 52k in income from my employement. I fear at this time I may not earn enough to justify a H2.
Therefore I looking for a baby hummer, something that will fit my current situation better. I should have myself clearer, thanks again for your advise.
Hi folks, the tax deduction for large SUV's and trucks is in section 179 of the tax code. It also allows accelerated depreciation for business-related capital investments such as computers and office equipment. The main proviso is that you must use it at least 50% for business purposes. I am a realtor/beginning investor and not a tax attorney so please confirm this independently with the right expert.
Good luck!
Vern,
The amount of money that you are clearing is only a part of the decision. One goal in owning any kind of business is to not pay (or defer) taxes. That way you will have greater capital to work with. Plus why give Uncle Sam more money than he wants (they make these deductions to help you grow your business).
If you have set up an LLC structure, remember that losses from the LLC can be applied against your personal taxes. So even though you have only made 24K in the RE business, when you show a loss, this can offset taxes paid by you "real" job.
In your case, you could pick up a new (or used) Expidition or Suburban for around 30K. You can finance it (you don't have to pay cash) and write off the amount that's attributable to your business, plus gas, maintenance, insurance, etc. That could wipe out the entire year's revenue plus carry some over to your personal taxes (or hold for another year as a loss carried forward). Use the vehicle for a few years, then trade it in on another. Any gains from the sale of the vehicle will be offset by the cost of the new vehicle, since there will be a whole new write-off