Section 179 Deduction 2020
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- Опубліковано 21 лип 2024
- In this video, I explain how the section 179 deduction works and the 2020 limits. This is the deduction that people talk about when they’re talking about “writing off your car” or however they talk about it. Basically a business vehicle needs to be depreciated over time but thanks to section 179 and bonus depreciation, the full value of the vehicle can be depreciated in the first year of purchase.
#IRS #section179 #bonusdepreciation
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• Section 179 Deduction ...
One important think I forgot to mention is that the asset has to be used at least 50% for business! Any less than that, no sec. 179 deduction.
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 am also curious
@@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.
How do you prove that you used it for over 50% for business? Do you have to have some kind of documentation?
Straight to the point no extra talking, staying on top, great information!
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.
Great video. Finally a simple summarization of this tax law.
Glad it was helpful!
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...
Thanks so much! Answered all my questions. Your videos are great.
Thank you for the feedback!
Concise and well articulated. Thanks for educating us!
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
That was a great explanation
Good job
Greg
I appreciate the video, but if I could offer a small critique nix the music, it was a bit too loud and distracting. Thanks.
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.
Music is annoying.
I totally agree, this guy seems very knowledgeable so I wanted to stay and listen but I was really distracted by the music.
Thanks for the info, been looking for a new vehicle for my small business. 2022 Volvo S90 Polestar here i come.
Thanks for the video. Are the same 179 and bonus depreciation rules applicable for car leases? How would the math work based on the X5 example you gave? If I used the vehicle 60% of the time for business and 40% for personal, would the 179 and bonus depreciations be subject to a 60/40 split?
Thank you, very good explanation. Better than my CPA attempts.
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.
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.
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?
So I make my monthly payments but what happens or how does it work with what I’ve paid for the year on payments. Does that account towards taxes?
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 🙏🏾..
how long do you keep the car for to avoid tax recoup .. 7, 8 years?
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
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 $130k+ Mercedes G Wagon?
#2 Would I have to pay off the vehicle up front or can I finance?
Following
Great information just started small business .
Question 🙋🏾♀️ so with a small business loan my question is what cars can I write off like Mercedes G wagon or jeep renegade that II’ll use it for business ??
Great Video Nguyen. Thanks a lot for taking time out of your day to educate us.
I got a question for you, let’s say my business has 50k of income on a calendar year and I want to buy a car for 90k and use 40k of personal assets to pay cash for the vehicle.
How this scenario would play out? Would the book Value be 40k or I would still have the book value at 0$?
Wondering about removing from inventory and placing into service? Say you sell computers or cars and you had some in inventory from previous year/s , then place it into service in current year? Is that considered "purchased" ? Also, can I sell the business an asset(backhoe) to be used in business and be 179ed ? Thanks
Thanks for this helpful info.
Great video, is there a book or source material that has the tax code accessible that you would recommend?
Can you take the mileage deduction the following year?
Great video. Can you lease purchase a vehicle and still take the sec 179 deduction for the first year?
Could I do Bonus for half the value and then S/L for the remainder of the assets life as well?
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.
Which section allows you to write off the maintenance for the cars and gas
How do I look up the depreciation on 179 from last years tax
I will watch all your videos
EXCELLENT info
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?
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
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.
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.
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.
Does this still apply for 2021? if you have a rv rental class c, does it qualify as business equipment? Thank you.
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?
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...
Thanks for explaining in detail
Can you give an example for deduction for vehicles weighing less than 6000 lbs
Using minimum depreciation
I think cars and lite trucks are $11,610.00
How long would I need to keep the vehicle for to make it worth it when taking full deduction?
I use a Honda fit for my IT business and I removed the backseat to place tools there. This vehicle only weighs 3k pounds however it is used for my business about 90% of the time. Can I buy a newer version of this car and write it off 100%?
Great video thank you!
You will likely be able to write off a maximum of 90% since you use it 90% for business.
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?
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 believe you can only deduct 50% of vehicle's price if its under 6,000 lbs.
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?
I appreciate that rule, thanks a lot
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 ?
So if I purchased a truck for my detailing business in 7/2021 can I do this this upcoming tax year?
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?
I also would like to know the answer to this
I’m not a tax pro but I believe the answer is YES. So long as you use in the year you purchased it.
Yes
Since vehicles are usually at the best price in Nov/Dec this is what anyone trying to buy an asset would want to do for their business…why overpay
No
Is it only greater than ? Or is is equal to and greater then? I’m talking about a Toyota Highlander hybrid which GVWR is 6000 pounds
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?
So how does the de uti on work and 100% that means the car it potentially paid off right? Do you get that money back?
So if I have a Toyota Corolla (weighs under 3k) can I still do the gradual depreciation deduction? (used over 50% for business)
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?
Great , thank you
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
Can you provide a list of the vehicles that qualify for the 179 deduction? Where can I find an updated list?
Google
How does it change your write off amount for a vehicle 6k lbs+ if you take out an auto loan to finance it (not a lease)?
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
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?
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#
Thank you sir
What exactly does it mean when the vehicle is written off? does it get paid for 100%? Or what happens?
does your business have to make a certain amount to be able to write off certain vehicles
How do you reflect this in the 2020 P&L?
When you choose to depreciate it slowly. Do you follow market value or is it up to you?
What if you don’t sell the vehicle post 179/deprecation but trade it in for a newer vehicle in 3-5 years? Is this considered a sale?
If you lease the car, are the lease payments deductible or is the value of the vehicle deductible?
Good video do you think it would work for a food truck
how does this code work if your company makes no money the first year?
HUH, what do you mean by "normal" depreciation?? I purchase it at the end of 2018 Dec and put into use the next year. Does this mean I skip the 179 depreciation?
also please explain about section 169. thanks
What if I want to buy a truck for my business every year?? Got several employees.. can I use the same method every year?
Nice! Going shopping
If I used section 179 this year (for a $25,000 deduction of $43,000 Toyota Tundra short bed,) and sell my business next year, and plan to keep said vehicle after the sale, do I have to pay the section 179 deduction back?
If the vehicle is on the balance sheet of your company and you sell your business then the purchaser will obtain the rights to your vehcile. If you want to maintain the vehicle you'll need to purchase it from your business and transfer ownership to yourself. The business will pay capital gains on the sale of the vehicle to you. Hire a CPA to prepare your taxes so that this calculation will comply with accounting standards
Is it true that if you are trading in a car, you don't get hit with a tax for the car you are trading in?
What happens if I buy a car and do 179 plus bonus deduction and then in a year or 2 I sell my business, what happens?
Nice choice in music
Do you have to put the car under your business LLC or buy under business owner you name
Doesn't the new TCGA mess with some of this?
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.
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?
Great video! So if Im a musician and I buy a guitar for 2500 dollars, as long as I'm using it in the year 2020 then I can write it off 100% on my 2020 taxes? and that basically means I get 2500 taken off what I'd be taxed on correct? sorry I'm new to all this and just found out about Section 179!
Yes, it would reduce your taxable income by $2500
what's the name of the song at the end of the video? haha THanks for the info bro
Does the needs to be new?
So what if I earn under $5,000 in my business this past year. And buy a 35,000 car that year. Do I get a $30,000 credit?
@@cisnerosmike thank you! That makes more sense
great information, thank you!
What happens when you sell the BMW after the 7 years useful life?
Does bonus depreciation and section 179 have to be on the first year of a new business? Or the first year of a new purchase?
If that’s the case, can you use it every year?
Same year of purchase
You can use them both every year.
@@CosmicCosmo1 thanks
How do you prove the vehicle is for business and not buying it as a personal vehicle.
Hi Ryan,
Great video .. I’m going to purchase / lease new business vehicle in next couple of weeks... I will use Alfa Romeo Stelvio as example .
If I lease it and prepay full lease payments ( $500 mth x 24 .. $12k).. what is my deduction ?
Or if a buy it at $35k how much can I write off with 179 and bonus ( vehicle is under 6,000 lbs )
Thank you
He states vehicle must be at least 6000 lbs. If the vehicle is less than 6k lbs then I would think the vehicle is ineligible for 179.
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 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
Do they have to be new cars? Could you buy something used and still do the write off ?
yes you can
Hi so a Tesla model 3 used for business purposes would not qualify for this deduction I assume?
@@shiftnsix the model x qualifies
Curious if you have ever heard anyone using this for a crypto mining operation, thank you for the info
700th like here. Grinding my way to the millionaire club