How do you define that percentage as business use? I mean, if you're an uber driver, I suppose it's pretty straightforward. However, what if you're a real estate investor and you use that vehicle for 'driving for dollars', meeting prospective clients (whether buyers or sellers of property), hitting up open houses, just whatever...anything having to do with that type of activity. Would it be a mileage recording of all of those trips? Seems like it would be quite tedious and open to fraudulent documentation. Also, does the vehicle have to be first owner, or can a pre-owned vehicle be used to take advantage of section 179 and the bonus deduction? Thanks!
@@ryanshannon7703 I would think a Realtor would easily be able to say over 50% was used for business for the reasons you stated. It would require an audit for that to be scrutinized, and you'd just want to tally and document your work-use each week or month to not forget the days and approx. miles you used it for work.
50 percent is the threshold for qualifying for 179, but you can only depreciate the fraction of the car that is used for business. If you only used the car 50% for business then you can only depreciate 50 percent of the car's value.
Great video! Here's why: not everyone explains the book value scenario of "resaling" a vehicle (a couple years later) that has been deducted 100% using the Section 179 Deduction.
I loved the music. It was fine. If you did not like it, watch a different video. He was here to offer information, not give you a massage and soothe your day. People like you are the problem with our overly sensitive world. Are you the type to ask for a manager at McDonalds? FOR SURE hahahaha. Jesus!
@@gusk23 28 people agree with him, and your the only one not too. Looks like your the outlier buddy. He didn’t say anything negative, just a suggestion to improve his videos.
@@evan5262 LOL and over 500 liked it as it is. Enjoy the message and move on. The world these days is critical of too much. I love his loud music. He can make his videos however he likes. Who told you that it NEEDS improving? YOU? Who says loud music is not the right way? YOU? Over 500 love it as is. YOU are the minority. Yet you seem to think he owes you something lol. You are FOR SURE a Democrat. Weak, opinionated, and think your "feedback" is valuable when in reality not a single person cares you exist. Find someone who has "the music volume" to your liking because a vast majority love it.
Great video. Would hope to see a little bit more of the math to show how much the car "actually" ends up costing in that year in order to decide if it is a good financial decision to reach for a larger, more expensive car or not.
Yes I agree. I am very confused. If I wanted to do this in real life I go online Order a Model X say 179 and they take 25K off? Then when I do my taxes I get a check somehow for the rest?!? It sounds like something is missing.
@@JasonRamosNJ You deduct 100% of the vehicle price from your expenses (as long as the vehicleis over 6,000 lbs). So, for example, if your business made $500,000 and your expenses were $200,000, you pay taxes to the government on $300,000 profit (which is appr. 33% of $300,000 = $100,000), your net profit after taxes would be $200,000 for that year. Now, if we use the same example, but you purchase a vehicle for $100,000, your expenses for that year will be $300,000 instead of $200,000, so you pay taxes on $200,000 instead of $300,000 ($200,000 x 33% = $66,000). So that way you save appr. $34,000 in tax payments. Again, those are just approximate numbers.
Nice video. Can I put the vehicle into service at the end of December, drive one business trip, park it for the rest of the year, thus creating 100% business use for 2020?
Great video: Have a couple of follow up questions: #1 Does your net income have to be equal or more than the purchase price of the car? For example, if I make $50k net income from my business, can I use these depreciation techniques to fully deduct a $130k+ Mercedes G Wagon? #2 Would I have to pay off the vehicle up front or can I finance?
Just to clarify, the vehicle weight does NOT have to be greater than 6,000 lbs to claim S179 deduction. But if you want to claim full bonus depreciation (100% remaining basis then it does have to be greater than 6,000 lbs GVWR S168). For example, say you buy a Tesla Model Y for $60k (for 100% business use). It’s GVWR is less than 6,000 lbs so the max depreciation in 2020 is $10,000 (S179) + $8,000k bonus depreciation = $18,000 in Year 1. That’s a tax savings of $6,660 assuming a 37% tax bracket. If instead you buy a Tesla Model X for $120k (100% business use). It’s GVWR is greater than 6,000 lbs so the max write off in 2020 is $25,000 (S179 for SUVs) + $95,000 (S168 100% Bonus Depreciation)= $120,000 in Year 1. That’s a tax savings of $44,400 assuming a 37% tax bracket. The remaining basis of the vehicle is $0 because it’s been fully depreciated. So bonus depreciation is a great way for businesses to recapture the costs associated with investing to grow the business through capital expenditures. www.investopedia.com/terms/l/luxury-automobile-limitations.asp bradyware.com/business-vehicle-deductions-2020/
I like how simple & clear your explanation sounds. Thanks! I'm teaching (so, W2!) but I wanna do uber & Lyft again (side hustle, as they say) & I'm looking at optimizing the write-offs. What else should I be looking at? Thanks ahead...
Thx for rhe excellent explan! I have a Q. What happens in the 2scenarios below :1. Lease paym If you prepay the lease 2. You put a large downpf/the car w/mtly paymts. How much can you deduct in the year of purchase and placed in service
Great video, thanks so much for sharing! I have a few questions. 1) If I plan to use the car for ride sharing (Uber and/or Lyft), does that count as "for business"? 2) For the at least 50% for business requirement, is that for the lifetime of ownership or does that phase out at some point? (say after X amount of years)
50% for the year of purchase. so if i buy a car in 2020, at least 50% of its use in 2020 must be for “business”. after u receive ur tax deduction for 2020, there is no minimum business usage because the whole point of section 179 is to help businesses deal with deappreciation.
The part that’s misleading for a lot of people is that the automatically think that if they buy a work truck for $80,000 they can write off the whole $80,000 and essentially have a free truck. Well the most important thing that you’re missing is that that’s only if the business is paying Hundreds and thousands of dollars in tax revenue to the IRS. If the business is essentially breaking even and for the first couple of years not making any profit there is nothing to write off. So section 170 deduction essentially is useless for businesses that are essentially writing off what they can and breaking even And not even making a profit.
It's not completely useless as any unused 179 deduction gets carried forward until it can get used. So if a business was already at break even before taking 179, the deduction would carry forward to next year. The statement of "essentially useless" is false.
Gross Vehicle Weight Rating is the maximum load the car can carry. the actual vehicle weight (curb weight) can be much less than 6000#. GVWR = curb weight + payload. Like you said, it's for commercial vehicles like trucks and vans and buses that may be light when empty, but can carry a lot of weight. i'm pretty sure the X5 doesn't weight 6000# empty, but GVWR for the X5 and many SUVs and pickups are over 6000#
Can you elect section 179 year one of a vehicle purchased for business use and then in year 2 plus every year thereafter take the mileage deduction as an ordinary business expense? This would be for a Turo type of business
I just don’t understand why is section 179 taken before bonus depreciation? Buy $50000 but have $20000 income = just take 100% depreciation to have -30000 income?
I see that you mentioned the tax savings for the IRS. Can you touch a little bit about how you would still be liable for state taxes in California on that income of 75,000 in your example of a vehicle purchase.
One thing I think people should talk about: is this a good financial decision? Paying the money back on income when you sell is a new angle that I did not know about. Also a lot of times people are desperate for tax deductions, or they spend more money in search of tax deductions without realizing they are not saving the total amount in actual cash. Meaning if their tax rate is 45% on income, and they "write off" a 100k in income. They are only really saving 45k. So in a sense, they spent 65k to save 45k from the government.
at the end, you said if we decided to sell the car in the later year, we would be hit with a large tax bill. how can that be when the car is depreciating every year there after?
If a vehicle is under 6k pounds, but you order it and have some parts replaced at the manufacturer like say, a plastic bumper with a steel bumper, front and back, then it passed the 6k pound mark, would that still qualify? They are regular options offered by the manufacturer but not sure how it works
8:28.. if the car is under 6,000 pounds, can't you deduct $18,500 and take bonus depreciation for the rest? Didn't the Job Act make this change? 100% for 2022 and 80% for 2023 etc?
I think you are wrong on the 6k LBS rule. You can deduct regular passanger vehicle but it has to be used for business at min. 50% and you are caped at 11,500 if I remember correctly
Great video! What if I bought the vehicle last year and didn’t use 179. With the example you used in your video. How much would I be able to write off? Also can I do this for leases and financed vehicles?
I'm a tax newbie with a question. Say you have a small business that has $40,000 owed in IRS taxes. If you finance a truck, say for $50,000, does that mean you can use section 179 to wipe your tax debt to $0?
What would happen if you take section 179 and bonus depreciation and say you wrecked that vehicle in year three. I'm assuming they would recapture some of those savings. Of course you would be purchasing another vehicle. Would the new vehicle under whatever the current 179 rules were cancel out the recapture owed
Great Video Nguyen. Thanks a lot for taking time out of your day to educate us. I got a question for you, let’s say my business has 50k of income on a calendar year and I want to buy a car for 90k and use 40k of personal assets to pay cash for the vehicle. How this scenario would play out? Would the book Value be 40k or I would still have the book value at 0$?
What happens if (before factoring in the vehicle) you only owe $7,000 in taxes at the end of the year? Should you depreciate the entire amount of a $50,000 car or just $7,000 of it to make your tax liability for that year ZERO?
Say I buy a $50k qualifying vehicle and take the full 100% deduction in 2021. Then I sell it in 2022 for $40k so the $40k is added to my 2022 income. But then in 2022 I also buy another qualifying vehicle for $40k. Can I use the section 179 again to fully write off that $40k replacement vehicle I purchased and offset the $40k added income from selling the first one?
You buy the car lets say Model X. Zero down. Do you get 25K towards the purchase or do you have to make a year of 1500 a mo payments then tax time get 25K and how do you "depreciate" the rest of the car who pays it? Does govt give you a check at year end to give to Tesla?
You can bypass 179 deduction and go 100% of the vehicle if over 6k lbs by using Bonus Depreciation. None to that $25k using 179 then the difference with Bonsu Appreciation. Makes no sense.
Great information just started small business . Question 🙋🏾♀️ so with a small business loan my question is what cars can I write off like Mercedes G wagon or jeep renegade that II’ll use it for business ??
The write off is not free money though right? Like it's just 75k you don't pay taxes on. It's not like I buy a 75k x5, then on my taxes write off 75k and they give me a 75k refund check.
What if you run a small residential care home for the elderly with a maximum of 6 residents and I want to buy a normal passenger vehicle over 6000 pounds? Would the $25,000 cap still apply since not all of the residents would need to leave at the same time, and it would also be used for things like getting groceries and supplies?
Thanks for the info. I really appreciate it. So it I were to buy an electric truck that costs 89k. I would get all that money back when I file my taxes? Sorry if it’s an ignorant question, I don’t know too much about tax code.
I’m getting mixed dates saying that the section 179 and bonus depreciation is ending in the end of 2021 or end of 2022. Can you explain which date it is?
Thank you so much for the video! If the small business owner uses Section 179 to purchase a qualifying SUV and plans on keeping the SUV for 5-7 years. What happens when you sell the SUV after such time/ the SUV's useful life?
I'm only 19 so I am probably wrong. But I would assume you pay capital gains tax on whatever the sell price was. Not sure if long term capital gains tax applies to this as it does with stocks...
Just came across your vid it was very helpful...just had a question what if the vehicle is under the 6,000 lbs? Would the business owner be eligible for the 18k deduction?
i can not hear what you said about the depreciation when skipping the first year. also, can you explain about the disposing of the asset like vehicle. thank you
Hi, thanks a lot for the video. If an individual who is sole proprietor sells a business asset in which he took both section 179 and bonus deduction would require to recapture the gain at ordinary rate (the individual'r tax rate) if that asset is sold at a gain in future?
Great video. I am a landlord which used to owned 6000lbs Landcruiser but I gifted to my son early this year. By taken section 179, can I have my son sell it back to me at market price $25000 thus I can write it off the taxable rental income? Please advise. Thank you much.
Great video! I have one question however, I have a few bitcoins that im thinking of selling. Could I use my short term capital gains profit to buy an suv and write if off completely under Section 179? I have a small carpentry business at the moment.
Hi, Nquyen. Is it possible to add any depreciation to car that I bought and sold at the same year when I put it into the service? Which way is better to go? one way is to deduct all purchase price with license/taxes taxes plus depreciation or another one just calculatee the difference between purchase- selling price? Please, advice.
Is there something like this business coaching or management training? Like if I were going to hire a coach for a year and we had a contract. Is there guidelines for taking a dedeuction this year in that case?
What about the costs of building an office for a self employed business in the basement of a private home? Can I use the 179 deduction or the bonus depreciation it?
Hi Nguyen, can you deduct sections 179 agains ordinary income. If someone has a loss on schedule C. But, they purchase a truck under their business and already has a loss they cannot take it agains their W-2 taxable income correct?
I bought a Ford Transit 350 Cargo Van and I am getting conflicting information regarding the weight being “gross vehicle weight” and “gross vehicle weight rating” Ford sent me a screenshot showing “gross vehicle weight” of 9500 but it also shows on my door sticker “gvwr” 9500 so I’m just confused how much the car actually weighs so I can write off the full cost rather than partial. Any thoughts ?
