Hey guys! I purchased my 2010 SCrew this last February, and started being self employed shortly after. I've currently got approx. 8500 miles on the truck, with almost half that being business related. I understand that there is a special "large SUV" tax credit from 2009 that has been continued for 2010. This special deduction allows you to deduct $25,000 of your vehicle depriciation in the first year it was in service, assuming it a) was purchased for business purposes, b) is used at least 50% for business purposes, c) is a large SUV (or a pickup with a cargo area of at least 6 feet in length).

My questions are these:
1) Does anyone have this tax deduction in writing? I've searched the internet, but keep coming up with last year's "vehicle deductions" that do not cover this special deduction.

2) Would a 5.5' bed with bed extender (yields 6.5' length of cargo space when utilized) be included?

3) Since I purchased the vehicle before I actually started being self employed, is that going to be an issue?

4) If I take the deduction this year, and become someone else's employee next year, is any of this deduction required to be payed back?

I'm trying to get my ducks in a row regarding this deduction, as it would almost payoff my truck if I'm able to use it. However, if there are any questionable issues, I wouldn't be completely against trading off to address them (i.e. purchase date vs. self employed date; bed length; etc).

Any Self Employed Business Vehicle Tax help would be much appreciated!

 

Talk to your CPA he should have the answers you're looking for. Let us know what he says.

 

TurboTAX is my CPA....and as the 2010 tax year software is not yet released, I'm afraid when it does become available it may be too late to change anything (i.e. trade off, last minute business mileage, etc).

I was hoping that someone on here that purchased within this tax year with this in mind would be able to assist.

 

I've never heard of it but I'll pass on how I do it and the IRS accepts it. They will want to know when the vehicle was put in service and the mileage on the clock. You will have to have in writing the starting mileage of the business venture and the ending mileage for each day along with where you went and depending on yer job, what happened that you needed to go there. They'll also want any non-business miles. I don't remember the form exactly but I believe it's IRS 2206. Might wanna take a look and see. You can also access all forms at irs.gov. Considering the messiah is considering eliminating any car/truck expenses and any mortgage interest from the tax codes, yer probably screwed anyway. You didn't really think all of the stimulus money was gonna come outa the thin air, did you?

 

I'm just going to e-mail this to you.

 

Labnerd:

I take it that you are using the mileage deduction instead of the depreciation deduction? I think this "special program" is only applicable for the depreciation deduction method, but again, I'm not sure.

As for a log, I have invoices where I show how many miles I billed for, but I do not have a daily log. I could average out the weekly mileage to the number of days billed, if that would fly. Also, I travel alot, so almost every one of my billed days are either at home, with no mileage, or on the road overnight (by personal vehicle or plane). While on the road overnight, is there any personal mileage per IRS rules, such as going to/from the laundromat, or restaurant, etc? I billed starting from the end of my driveway until I returned to my driveway.

I'm a complete noob regarding business deductions, so any help is appreciated.

 

Thanks, Rambo!

I knew I wasn't crazy about this program, but again couldn't find anything in writing covering how it works. I'll search out 179 Deductions and see what all the details are, but it sounds like I'll be able to do it.

As for an official start date for the business, when would that be considered? I'm basically a 1099 Contractor, so theoretically, I could say I started being available for work the day I bought the truck (or before). Or would I need to have some sort of proof, such as first invoice?

 

Found at the following link are the details I was looking for (mostly, anyway):
http://http://www.section179.org/section_179_vehicle_deductions.html

Here are the general guidelines for using the Section 179 Deduction for vehicle purchases:

What Vehicles Qualify?
Vehicles used in your business qualify - but certain passenger vehicles have a $25,000 limitation, while other vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes qualify for full Section 179 deduction:

SUV’s and any 4-wheeled vehicle designed or used to carry passengers over public roads with a Gross Vehicle Weight (GVW) of more than 6,000 lbs and not more than 14,000 lbs (see below for limits on these heavy SUVs)

Heavy “non-SUV” vehicles with a cargo area at least six feet in interior length (this area must not be easily accessible from the passenger area.) To give an example, many pickups with full-sized cargo beds will qualify (although some "extended cab" pickups may have beds that are too small to qualify.)

...

There is a limit you can deduct for example #1 above – SUV’s (as well as other passenger vehicles not listed above). The limit for the deduction is $25,000. However, you can take a normal depreciation deduction for the rest. So if you buy a $50,000 Hummer, you can deduct $25,000, and then take normal depreciation (20%) on the remaining $25,000.

Examples 2-4 qualify for the normal Section 179 Deduction limits (currently $500,000 in 2010).

So, if I purchased for $27,000 and use it 50% of the time for business, I can deduct $25,000 right off the bat for the year it was put into service, plus 50% of the remaining $2000 for business use, giving me a deduction of $26,000? Or am I missing something? If this is correct, how much of that would you physically "get back"?

 

I use my personal vehicle for 1099 related side-work throughout the year and I just write off a hefty portion of the mileage and maintenance for the vehicle.

 

NOTE: I AM NOT AN ACCOUNTANT!!!! RESEARCH YOURSELF BEFORE DOING ANY FILING
However, the $25,000 limit does not apply to any vehicle:

*Designed to seat more than nine passengers behind the driver's seat,
*Equipped with a cargo area (either open or enclosed by a cap) of at least six feet in interior length that is not readily accessible from the passenger compartment, or
*That has an integral enclosure fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield

The $25K limit on the deduction would apply to you with the 5.5 bed length, those that have purchased the 6.5 bed would not have a cap/limit for the deduction. I think you would be pushing to count the tailgate open and bed extender as INTERIOR length. I have the 6.5 bed for a reason!
From my understanding of this, your math is off here. If you purchased the truck for $27K and used it 50% of the time for business your deduction would be 1/2 of the $27K or $13.5K. You would need a $50K truck at 50% use to reach the cap on the deduction if purchased outright. How much it would save you it dependent on your tax bracket and keep in mind this is a deduction, not a tax credit! If you sell the vehicle or transfer it's primary use to your wife(I asked my CPA about this with the wife's Tahoe in 2002 after I had driven it for 4 months!!) you must recapture what the truck is sold for as income(not subjected to self employment tax though) Again, I am not an accountant and I have no idea about the situation of purchasing the truck before you were starting the business/self-employed or how it works if you go to work for someone else.
Your savings given the math of the $27K truck above at 50% business use and figuring a 28% tax bracket would save you $3780 in tax payment to the government(28% of the $13.5K) by adjusting your income down. It you were really lucky the adjustment could lower your tax bracket and might save you more.
All of the above information is very questionable and comes from someone who is not an accountant but a self employed person who likes to trade pickup trucks as often as I can get by with it without my wife killing me...so saving some $ on tax payments every couple of years helps my position!!

 

That's some good info, guys.....

...and I knew I was applying the %s wrong here...I just wasn't sure how.

Ok, so I feel that I can take the 50% deduction roughly being $13,500, and depending on my tax bracket, get somewhere between 25-35% back.

So, what would happen if I traded vehicles in late December? Lets say I drove 3000 miles in December, 2/3 of which would be business. Would I be able to take a 2/3rds deduction here? Would I count anything of the previous vehicle?

 

I don't see how you can disqualify a 5.5' bed with an extender as not meeting the requirement of "Equipped with a cargo area (either open or enclosed by a cap) of at least six feet in interior length that is not readily accessible from the passenger compartment."

They specify that the cargo area measure six feet, and it most certainly does.

Talk to a proper tax guy of course. Mine did indicate that purchasing it in December is perfectly acceptable, but I don't know how the mileage is structured. It's worth a brief consultation with a CPA to get this deduction, even if s/he's charging you 150/200 an hour.

(Edit..didn't realize this is my first post here....oh well, Hello all, I've been lurking for a while )

 

The key for 179 credits is the date placed in service. The date placed in service is the date it was ready for use in the business.

 

Welcome, Droid!

That's kinda what I was thinking too, which is why I specified with a bed extender, but since I haven't gone through this process before, I wasn't sure if there was some sort of "clause" that covered this.

BlueJay:

I understand the "date put into service", but is there anything about a minimum amount of time and/or mileage necessary before you can claim it as business? I mean, is there anything keeping me from buying a truck on Dec. 30 driving 5 personal miles, then turn around and drive 300 business miles, and taking a 100% deduction, even though in real life it would be more like 50/50? What if I bought it Dec. 31 and only drove the 5 miles home? What % could be used then?

 

No, nothing whatsoever. The law is intended to spur capital spending. Companies sometimes wait till near year end to determine which year they will need the tax credit and that determines when they make a purchase.