I have a question. Purchasing a 2020 cargo van under my LLC. Single member LLC with S election. Price of van is 45,00 before incentives. I also have a personal vehicle I am trading in worth $12,500. Of course I'd like to take advantage of sec.179 or bonus deprecation whichever is applicable for the Van. Anyways, I had some questions regarding my personal vehicle trade and how it is listed on the sales order, whether a cash contribution or an actual trade in.
The dealer is flexible in how I structure that vehicle trade. They will keep it completely off the paperwork if I want. I wanted to put $10,000 of that into the purchase and get a check for the balance. They will list the cash contribution on the sales order of $10,000, so basically cash down. The downside of this is the sales tax I pay on the vehicle increases by $700 roughly. They said if I list the vehicle on the paperwork as a trade in, they can reduce the sales tax since tax is only charge on the vehicle price after any trade-in reduction. So a $700 savings.
However, I don't know which method is smarter long term when you factor in other things that could potentially be a factor. Say....having a tax liability on the vehicle trade value come tax time when maybe there wouldn't have been a liability if I kept the trade off the paperwork and had it just listed as cash down? Or maybe it doesn't matter, and either way I did it, it is still contributed capital and would/or wouldn't be taxed and I'd be a fool not to list the trade and save $700 in sales tax. I just worry listing the trade would wind up with me being taxed something crazy like 21% of the $12,500 trade-in value come tax time. When maybe if I had just listed it as a cash contribution I would have had no tax liability.
Hopefully someone can bring me some clarification of how this all works. Thank you.
