New Business Vehicle bonus depreciation

[bigcountry350]

Hi! I've been searching the forums and haven't found the answer to this question.  I'm using Turbo Tax Home & Business and I am working on my vehicle expenses for my 2022 tax return.  Here is my situation:

1. I purchased a new vehicle in 2022 (over 6000 lbs GVWR) and it was used 100% for business in 2022

2. When entering in the "Actual Expenses" into turbo tax it asks for the purchase price and the date the vehicle was purchased and put into service.

3. It does not give me any options on how I want to depreciate the vehicle such as taking advantage of the bonus depreciation under section 168.

4. What is happening is that is giving me 5% of the purchase price as depreciation. I discovered this by entering in no other actual expenses other than a purchase price, and the actual expenses deduction shown was 5% of the purchase price.  I entered in other purchase prices to see what happened, and they all resulted in an actual expenses deduction of only 5% of the purchase price... ?

Am I missing something.... is there another section in Turbo Tax Home and Business to take this type of deduction? I am filing as a single member LLC, so my understanding is that this Turbo Tax version is appropriate, and is the one I have used last year.  The only difference is that I need to know how to elect the correct depreciation option in Turbo Tax for my situation, and I see nowhere how to do that?

I've seen other similar questions to this, so hopefully this will benefit others as well.

Thanks!

[ThomasM125 · Accepted solution]

It appears that the deduction is being limited by the business versus personal miles you entered. You need to go back through the vehicle entry screens and make sure you entered the business miles and no personal mileage in order to get 100% of the depreciation to populate.

[bigcountry350]

@ThomasM125 Thanks for the response.

I had my business and total miles driven which were the same using the "I'll enter the total miles I drove during the period I used my vehicle for business in 2022".  It wasn't until I chose the "I'll enter my beginning and ending odometer readings for 2022" that it offered me the "special depreciation allowance" election.

I'm unsure why I needed to do the odometer option vs the first, because the mileage ratio is the same... If anyone else runs into this issue, hopefully they see this post and it saves them the time I spent banging my head against the desk (I'm ok though) haha

[jhermano872]

I am using TT Business for an LLC and purchased a vehicle in 2022 for business. There is no area where the software is asking for thepurchase price. There is only a question about a new vehicle for alternative engery (hybrid, electric, etc.). Where can I enter this?

[ThomasM125]

You need to enter your vehicle in the Depreciation of Assets section. First, enter a description and date you put the vehicle into service, then on the screen that says Describe This Asset, choose Vehicles and then you will see the option to enter the cost of the vehicle and other information on the next screens. @jhermano872

[a074685]

Can I use Schedule C to deduct New Business Vehicle and other expense related to the business under LLC and use Schedule E for  the rental properties? 

I do not see on Schedule E area to enter the entire cost of the Vehicle, neither office space % deductions to mention some items.

I do not see on Schedule C are to enter mortgages %, and so on as so detailed like Section E. 

Can I use Schedule E for the rentals in come and so, what is applicable and Schedule C  for New Business Vehicle and other transportation expense?

[ThomasM125]

You need to enter all your deductions for rental properties on schedule E and the deductions for a business on schedule C. You can't split deductions for the same activity between schedule C and schedule E. Rental activties do not typically require vehicle and home office expenses. A rental typically has things like mortgage interest, property taxes and repairs. If you need to enter vehicle expenses, you need to calculate them separately and enter the deduction amount as a miscellaneous expense item. The home office deduction is most likely not allowed as it is not normally an ordinary and necessary expense as it related to a rental activity. If you are considered a real estate professional, you can enter all of your rental activities on a schedule C as it will be treated as a business. You can can learn more about being a real estate professional here:

Real Estate Professional

[a074685]

 I purchased a vehicle under the LLC so I could use it to manage the rentals, which I am aware have to split millage personal and related to rental property. I am not a real estate agent. As well as having a W-2 from a full time employer.  As per understanding from support your input- Use Self-employee Schedule C for car expenses for deduction under section 179 and other expenses tools office supplies and so on and  everything else for the  rental properties and the home purchased in 2022 will be on Schedule E. Two individuals from the chat misloaded and I am confused.  Last year and year before last and previous years did not have the LLC, I was using Schedule E.   

[ThomasM125]

You need to enter all of your rental deductions, including the vehicle travel expenses, on schedule E, if you are a single-member LLC. Although you are allowed to deduct travel expenses, it should be in the form of a mileage allowance based on the business miles driven, as opposed to a depreciation expense deduction. The business standard mileage allowance in 2022 is 58.5 cents per mile for January - June and 62.4 cents after that date. @a074685

[a074685]

I bought a vehicles and would like to make deduction under section 179-Schedule E does not have the option.

Schedule E does not have the deduction for home office % space wise from my house residency. 

As per you input-

If I used Schedule E I have to divide all miles car cost between the 3 properties that I have? As per you input that is greatly appreciated.  

If I used Schedule E I can not deduct of car rentals and or lyft usage for transportation for part of 2022 Jan to May the cost that will be under the LLC. 

[AbrahamT]

Can you clarify what you mean by not deducting car rentals or lyft usage for part of Jan-May of 2022 on Sch E. If it was related to your rental activity, then include it on your Sch E including the actual car expenses or mieage driven multiplied by the standard mileage rate  58.5 cents per hour from January-June 2022 and 62.5 cents per hour from July -December 2022. . See HERE Pg. 4 Sections "Type of Expenses", Local transportation expenses, Travel expenses. 

[a074685]

In 2022 from January to May as method of transportation in many instances, have rented cars or/and used Uber of Lytf. I did not have a vehicle during this time frame, until May 2022 when I purchased a vehicle under the LLC. I work from home and portion of my time I am dedicating it to the rental property business, I would like to have the opportunity to deduct office space % of my current home. I purchased a home- my resident in April 2022. 

You keep mentioning deduct mile driving, I would like to get the Section 179 purchase vehicle expense deduction, gas, taxes paid during the purchase of the vehicle and so on. I would like to deduct car expenses  moving forward to maintain consistency instead of miles. moving on. 

[AbrahamT]

So to clarify, you set up a single member LLC which you are reporting on the Sch C, is this the rental business you are setting up on the Sch C or it is some other business that you are setting up? It depends

If you are a real estate professional in which case you must meet both of these criteria 

* More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate.

*You perform more than 750 hours of services during the tax year in real property trades or businesses in which you      

  materially participate.”

then you would report all your income and expenses relating to the realty business, on that Sch C including the rented car and lyft expenses as long as it pertained to the business as well as taking the 179 vehicle deduction and the home office deduction as well. All on that Sch C.

[a074685]

So to clarify, you set up a single member LLC which you are reporting on the Sch C, is this the rental business you are setting up on the Schedule C or it is some other business that you are setting up? 

Yes, I have an single member LLC that I am using to manage the rental properties with expenses such a vehicle that purchased in May 2022-before from Jan -May I used Uber, Lyft and rent cars-gas and using home office that I would like to deduct as business expense, % space of my home. Home that I purchase in April 2022.  I would like to use Section 179 to deduct vehicle expenses moving forward next years for consistency. I am currently have all the rental properties repairs, taxes, maintenance, and other cost for the rental on Schedule E. I am not real estate agent because I am maintain a log with activities-something, I could do during next year. I di mentioned previously.  Schedule E does not have the deduction for home office % space wise from my house residency and either for Section 179 vehicle deduction. Schedule C does does not have the line items prepopulated for taxes, bank interest paid. 

[AmyC]

It sounds like you understand everything but the sec 179 or I am missing something. You have the rental on sch E. You have your business and home office on sch C. Your vehicle goes on both schedules with different mileage amounts.

Sec 179 is used for a one time big expense instead of depreciating the item- it isn't an annual thing to write off regular expenses. You would use either standard mileage or actual expenses each year. If you claim a sec 179 on a car, you must use actual expenses in the future.

Per IRS Publication 463  Car Expenses

Standard mileage rate not allowed. You can’t use the standard mileage rate if you: 

• Use five or more cars at the same time (such as in fleet operations); 

• Claimed a depreciation deduction for the car using any method other than straight line, for example, Modified Accelerated Cost Recovery System (MACRS) (as discussed later under Depreciation Deduction); 

• Claimed a section 179 deduction (discussed later) on the car; 

• Claimed the special depreciation allowance on the car; or 

• Claimed actual car expenses after 1997 for a car you leased.