All Types of Depr on New Luxury or Standard Sedan Cars

[Raj1]

All Types of Depr on New Luxury or Standard Sedan Cars

I do not have real life situations of clients with business depreciation.  I wanted to understand the subject of depreciation in more depth.  The entire hypothetical situation, assuming most trying conditions, was constructed based on various examples seen in various books on tax laws.  The intention was to provide some background material such that main focus stays on the depreciation question.  However, the material in some of these books was not clear about luxury v/s non-luxury cars.  There is a mention about cut off of 6,000 pounds weight for Section 179 depreciation.

Let me rephrase the question:

Assuming Tax Payer has satisfied (a) Dollar Limitation (b) Investment Limitation & (c) Taxable Income Limitation, and the Sch C business is highly profitable

What is the Sec 179 or Regular Depr on autos of “all types”?

Any thoughts / clarifications / updates / community members’ experience would be highly appreciated.

Thanks and Regards.

Raj1

[George4Tacks]

A "luxury" auto is one costing about $19,000 or more.  

Spend some time with Pub 946 https://www.irs.gov/publications/p946

[TaxGuyBill]

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@Raj1 wrote:

2021 Tax Year Estimated but most likely Situation

Sch C nominal loss

2022 Tax Year Estimated but most likely Situation: More or less similar to 2021 tax situation.

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Take a step back.  Are you saying the taxpayer is already EXPECTING a Schedule C loss in 2021 and 2022?

Is this really a business with the goal to make a profit?

At first glance, this seems like a person who wants to write off vehicles right before retiring, and is trying to call an activity a "business" which might not necessarily be a business.

[Raj1]

Please discard my previous hypothetical example and see if you can clarify about the auto depr issue (which is the main focus of this post) in this much simple and brief new hypothetical example.

Assuming a “Young Adult” (assume any age) Tax Payer with many more years of various taxable incomes has satisfied (a) Dollar Limitation (b) Investment Limitation & (c) Taxable Income Limitation, and has the Sch C business which is highly profitable.  Please feel free to assume and use any income amounts for current and future years needed to clarify the matter.  

What is the Sec 179 or Regular Depr on autos of “all types”?

Thanks.

[George4Tacks · Accepted solution]

@Raj1 did you look at the link I posted for Pub 946. 

Assume whatever you want and do some research. https://www.irs.gov/publications/p946#en_US_2020_publink1000107703

Purchase Tax Tools as it has some excellent auto "tools"

The primary reason of this forum is answer software questions and specific tax questions, not to wander into every nook and cranny and other possibilities. 

[TaxGuyBill]

You gave us VERY specific information which certainly did NOT sound hypothetical.  If it was hypothetical. please don't waste our time with a hypothetical situation.

If you have SPECIFIC questions about a situation, go ahead and ask and we may be able to help you.

P.S. George, the Luxury Vehicle amount is $50,000+ now that they changed the limits a couple of years ago.

[Raj1]

Thanks for suggesting Tax Tools.

[qbteachmt]

It seems to me, from reading this topic before it was edited and afterwards, this is very "human-centric" :

"Assuming a “Young Adult” (assume any age) Tax Payer with many more years of various taxable incomes has satisfied (a) Dollar Limitation (b) Investment Limitation & (c) Taxable Income Limitation, and has the Sch C business which is highly profitable. Please feel free to assume and use any income amounts for current and future years needed to clarify the matter."

What you have skimmed over twice is, does the use of this vehicle meet the regulation qualifications for that business as required?

Because you focused on the person, their income, the costs, etc. You didn't really focus on the Business. Taking section 179 or Regular depreciation or even the Mileage Allowance are all options that you evaluate for the relationship of that vehicle and that business and what is tax advantageous for that vehicle and that business.