Partial section 179 deduction for car

[hntrust]

Can a partial section 179 deduction on Schedule C be used for a new car that is used 50% for business. Can I also take the standard mileage deduction for business travel. If I can't take the standard mileage deduction in the same year that I use the 179 deduction, can I still use the standard mileage deduction in future years for the same vehicle?

[Vanessa A · Accepted solution]

No, you cannot use both standard mileage and section 179. 

If you take the actual expenses and depreciation on a new car, you can never take the standard mileage deduction for that vehicle.  To use the Standard mileage deduction, you must choose to use it the first year you use the car for business. If you take any Section 179 depreciation, you cannot use the standard mileage on the vehicle in future years. 

[hntrust]

If I use the standard mileage deduction for 2022 and going forward, is there any other depreciation method I can also use besides section 179? If there is  another depreciation method to use, would the depreciation be recovered when I sell the car in the future?

[Vanessa A]

No, you can never use both the standard mileage rate and take depreciation in the same year.  Standard mileage does include a preset amount of depreciation, so, your vehicles' basis is reduced, which will likely result in an increase of profit on the sale or lesson your loss. 

Per the IRS Pub 463 page 15," If you choose to use the standard mileage rate in the first year, in later years, you can switch from the standard mileage rate to the actual expenses method. If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation for the car’s remaining estimated useful life, subject to depreciation limits"

  The useful life of a vehicle is 5 years.  So, if you chose to take depreciation next year, then you would have 4 more years of useful life, but you would take depreciation based on 5 years.  

If you chose this year, to use any type of accelerated depreciation method, including section 179, and you dispose of the vehicle before the 5 years is up, then you would have to recapture the excess depreciation.  

 (Edited 3/22/23 @ 8:20AM PST) @hntrust 

[AmeliesUncle]

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@hntrust wrote:

If I use the standard mileage deduction for 2022 and going forward, is there any other depreciation method I can also use

The Standard Mileage Rate has depreciation built-in to it, so you can't depreciate it AGAIN.

[AmeliesUncle]

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@Vanessa A wrote:

but it is not recaptured when you sell the car.

 The useful life of a vehicle is 5 years.  

When you use straight line depreciation, you would not need to recapture the depreciation if you dispose of the vehicle.  

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Um, no, no and no.

Depreciation (including the portion of the Standard Mileage Rate) is recaptured if you sell the vehicle at a gain.

The "useful life" is probably 3 years.  The "Recovery Period" is 5 years.

As I said before, depreciation (including the portion of the Standard Mileage Rate) is recaptured if you sell the vehicle at a gain.

[megadeth4]

Hi @Vanessa A But can you use the standard deduction against the vehicle ONE TIME ONLY the same year you acquired it AND used 179 Bonus Depreciation, knowing you have to switch to Actuals in all subsequent years? For example, buy a new car in 2024 that qualifies and uses 179 Bonus, use standard deduction, then starting in 2025 you have to move to Actuals? Several online sites say the following:

NOTE: If a taxpayer uses either Section 179 expensing or Bonus Depreciation, the standard mileage rates cannot be used for ANY periods after the year that depreciation is taken. Actual auto expenses (fuel, tires, repairs, etc.) must be tracked going forward.

The “ANY periods AFTER the year that depreciation is taken” is what makes this a bit unclear. Appreciate your help!  

[Vanessa A]

  No.  You cannot use the standard mileage deduction in the first year and then take bonus depreciation in the following year.  If you use the standard mileage deduction in year one, you must use the straight line method of depreciation in future years. 

[megadeth4]

Hi @Vanessa A - if I bought the new car in 2024 and claim 179 Bonus in 2024, would I be able to use Standard Mileage in 2024 as well (then move to Actuals in 2025)? Or would I have to use Actuals in 2024 (and each subsequent year)? 

[Vanessa A]

No.  If you bought the car in 2024 and you use section 179, then you can only use actual expenses after that.  You cannot in any way combine standard mileage and Section 179.

Your options are

1. Section 179 in year one, the after that actual expenses OR
2. Standard Mileage in year one and all future years  OR
3. Standard Mileage in year one and actual expenses using the straight line method of depreciation in future years.  You can switch back and forth using this method. Your vehicle would be fully depreciated after 5 years.

Topic no. 510, Business use of car

[megadeth4]

Thank you and sorry for the back and forth. So going with Option 1 (to use the 179 Bonus in 2024), I can claim zero other expenses for this car until the 2025 tax year, correct? The system neither makes it clear nor warns you if you add a new vehicle that this is ineligible for 2024 expenses since you’re claiming 179. 

[RobertB4444]

That is correct (except for parking fees and tolls).

@megadeth4 

[AmeliesUncle]

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@megadeth4 wrote:

 use the 179 Bonus in 2024), I can claim zero other expenses for this car until the 2025 tax year, correct?

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No, you claim all other actual expenses for the vehicle, such as gas, insurance, repairs, maintenance, etc.

[megadeth4]

Hi @RobertB4444 Another post that just came in to this thread contradicts this. When I claim the 2024 179 Bonus Depreciation, can I also claim Actual expenses for the car (such as Gas, Tires, Parking, etc) for 2024 as well or would that not be eligible until 2025 (and therefore I claim zero actual expenses in 2024)? Therefore I would be claiming BOTH the 179 Bonus + Actual Expense in the year I acquired the vehicle. 

[RobertB4444]

The business percentage of actual expenses, yes.

@megadeth4