STOP Dont Buy a Vehicle Until You Watch This! 3 Ways to Write off the FULL Cost Under Section 179.

what's up YouTube corey Hankerson here from legacy tax a financial planning coming to you live from the Washington Auto Show standing in front of this fantastic new Range Rover listen if you're thinking about buying a new car or truck don't you dare by one until you watch this video I'm gonna explain how you can write off 100% of the car's purchase price in the very first year let's dive right in okay guys before we get into the content if you haven't already done so I want to remind you to please subscribe to our channel hit that notification bell so you'll be notified each time we post a new video and finally follow us on Instagram as well as Facebook we post new content there as well alright so everybody needs transportation and sooner or later most of us are gonna go out and purchase a vehicle to get around in right but if you're a business owner even if it's a small home-based business you may be able to write off some or all of that vehicles purchase price under section 179 of the Internal Revenue Code what is the 179 deduction so most people think of one section 179 there's some mysterious complicated section of the tax code it isn't really all that complicated though see essentially section 179 of the IRS Code allows a business to deduct the full purchase price of qualifying equipment or software whether you financed it or bought it outright during the same year of the purchase instead of depreciating it over a long period of time so that means that if you buy or lease a piece of equipment you can deduct the full purchase price from your gross income in thereby lower your taxes right now it's an incentive that was created by the government to encourage businesses to buy equipment and invest in themselves in the past when your business bought qualifying equipment it typically had to write it off a little at a time through depreciation so for example let's say you went out and bought in $50,000 piece of machinery you would get to write off let's say $10,000 a year for five years numbers are just meant for it for for example purposes right now while it's true that this is better than no write-off at all most business owners I want to say all business owners would really prefer to write off the entire equipment purchase price in the year that they've bought it rather than take a write-off slowly over time but that's exactly what section 179 does it allows your business to write off the entire purchase price for qualifying equipment in the current year subject to certain limitations because there's always gonna be limitations and caveats and all those kind of things so what type of property qualifies for section 179 we're talking about buildings we're talking about machinery we're talking about vehicles furniture equipment software patents copyright livestock and even drumroll vehicles now several years ago section 179 was often referred to as the SUV tax loophole or the Hummer tax the Hummer deduction that's because many business owners use this section of the tax code to really write off the purchase of big expensive SUVs like Hummers or Escalades however the IRS they got wise to that and they really tightened up the rules a little bit but section 179 is still a powerful tool for business owners to go out and acquire equipment specifically vehicles but exactly what type of vehicles qualify and how much can you deduct so for passenger cars you can deduct up to eleven thousand one hundred and sixty dollars in the year that the vehicle is purchased and placed into service for SUVs and trucks that have a gross vehicle weight over six thousand pounds but less than fourteen thousand pounds you can qualify to be able to deduct up to twenty five thousand dollars if the vehicle is purchased in and put into place prior to the end of the year there are limitations and conditions that apply but as you can see the largest deductions are for big trucks and SUVs we're talking about vehicles like the Ford f-150 the Chevy Tahoe Dodge Ram Range Rover GMC Yukon Mercedes GLS you get the picture now I can hear you saying you said you were going to show us how to write off one hundred percent of the vehicles purchase price you can't purchase a whole truck for $25,000 what's that just clickbait not really see there are some exceptions to the $25,000 limit and some strategies that allow you to write off the entire purchase price here are three ways to go about getting that done first there are types of vehicles that are exempt from the $25,000 limit entirely in fact they're exempt from any limit entirely we're talking about shuttle vans that seat more than nine passengers behind the driver pickup trucks with full size cargo beds the the bid has to be at least six feet long and not accessible to the driver from inside the vehicle like the one you see here we're talking about delivery vehicles like this one with no seating whatsoever behind the driver these types of vehicles don't have a limit they're not subject to that $25,000 limit on the amount that you can deduct you can deduct the entire purchase price in the year that you buy the vehicle and place it into service even if that purchase price is more than $25,000 here's the second strategy now nothing says you have to buy a brand new vehicle so you might not be able to find a new Tahoe or a new f-150 for less than $25,000 but you certainly can find one just a few years old that fits the bill IRS Publication 946 specifically states that the property can be either new or quote new to you which means that you can take the deduction for purchasing a previously owned vehicle now a quick search on autotrader.com today February 2nd 2020 shows that there are used Ford f-150s and used Chevy Tahoe selling for less than $25,000 within 100,000 miles of my house here in Maryland there are literally hundreds of them of used vehicles talking about Tahoe's we're talking about f-150s I see a couple of Yukons here there are a couple of Mercedes vehicles here I see so there are all sorts of vehicles that are within the criteria over six thousands of pounds less than 14,000 pounds that you can buy a used one for less than $25,000 so you consider buying one of these and the section 179 deduction would completely cover the purchase price the third strategy you don't have to buy the vehicle outright right IRS Publication 946 tells us that even a vehicle that is subject to debt qualifies as a vehicle which you own for purposes of section 179 here's what that means that means that according to the IRS they consider you to be the owner this is a vehicle you own even if you bought it with a loan and you're still making payments so what's the play you go out and you purchase a newer vehicle with financing and use that $25,000 deduction to offset the monthly auto loan payment so let's say you go out and buy a newer GMC Yukon a brand new GMC Yukon for $60,000 with a monthly payment of 925 the section 179 deduction will cover the monthly auto loan payment for 24 months after 24 months maybe you consider trading in the Yukon and getting another new one and claiming the deduction all over again that way you have this deduction that's essentially making your monthly payments for you now we've discussed the Parente kit something if you like that strategy those one you know the first one second or third one I want you to go ahead and hit the like button down below if you haven't subscribed go ahead and subscribe to the to the channel here shameless plug I know I know but show us some love shows some support right so we've discussed the pros but what about the cons are there any potential pitfalls with 179 3 kind of for the vehicle must be used for business purposes that means that personal use is not deductible okay if you're using the vehicle half for personal and half for business then you can only claim 50% of the deduction you'll want to keep a log of your mileage to prove what percentage was personal and what percentage of the vehicles use was business you have a hard time proving that the vehicle was used 100% for business use if you don't also have another vehicle that you can use for personal use so in other words if this if the vehicle that you're claiming the 179 deduction on is the only vehicle that you own you're probably gonna have a hard time claiming that it was 100% business use so you want to keep a log and if you're gonna try to claim 100% use you want to have another vehicle on the side the second thing has to do with your basis right so claiming deducting 100 percent of the vehicles purchase price is gonna leave you with a zero basis in the vehicle which means that when you go out and sell it when your business sells the car then you're gonna have to pay capital gains tax on the proceeds of the sale okay you want to talk to your tax pro about that one to make sure that you really understand it there are some ways to get around it but without some some planning before you who haven't sell the vehicle you're gonna be hit with the capital gains tax bill so again talk to a tax problem about that or schedule an appointment to talk to us here at legacy tax number three is something called depreciation recapture essentially that means if you ever stopped using the vehicle for business use and decide you want it to now be a personal use vehicle then you're gonna have to pay back some of the money that you previously deducted under 179 again that's one for tax Pro the last one here is you can't use section 179 to generate a business loss okay in other words you have to be making money and you have to have a tax liability of at least $25,000 in order to claim the full twenty five thousand dollar deduction so the bottom line is if you're looking to buy a truck or an SUV you want to talk to your tax advisor to see if the section 179 deduction makes sense for you in your situation don't just throw money after deductions if you don't really need something for your business then don't go out and run out and buy it just to be able to claim the deduction it's ultimately not a good idea you want to make prudent and smart business decisions not just chased after deductions but if you actually need a new truck or a new SUV or a new piece of equipment for your business then 179 is a powerful tool that can take your business to the next level to learn more about the section 179 deduction I want you to visit IRS Publication 946 it talks all about how you depreciate property also I want you to go ahead and look at publication 463 talks about travel and car expenses I posted a link to both of those IRS publications in the description below you click on them you'll take you directly to our s gov where you can read or download those publications for yourself finally if you like this video you know what I'm gonna say I want you to go ahead and press the like button below and also subscribe to our Channel don't forget to follow us on Facebook or Instagram we do post content there as well finally go to our website and schedule a free 30 minute tax strategy session it's free no obligation free means no cost right we can review your tax at financial situation to determine if section 179 is a good tool for you and your business there's a link to our scheduling website below in the description as well alright so that's it for now guys talk to you later you [Music]

Channel: Corey W. Hankerson JD EA

Views: 850,597

Keywords: write off, car expenses, IRS taxes, car deductions, auto deductions, write off car, deduct my car, section 179, bonus depreciation, actual expense v. standard miles, washington auto show, corey hankerson, corey w hankerson, corey hankerson jd

Id: KfjC7wIopGc

Length: 13min 7sec (787 seconds)

Published: Thu Feb 06 2020