Section 179 - used car / new to us business write off

[1099erGirl]

I have searched many conversations about the Sect. 179 / first year business write of on biz vehicle and gleaned a lot of good info already.

Now I just have questions based on our example that I didn't see answered exactly in prior notes. 

We realized my hubby's business using a smaller car just isn't working anymore to carry equipment for his jobs and we want an SUV and because we have a profit for his single member LLC, this year it may be wise to upgrade his car now for the 179 write off before end of year, as with it we will still have profit left over. 

We're looking at both over 6000 lbs and under SUV. (I played with fake numbers in 2021 software with a sample tax return by adding a car to last year's numbers and it seems the bigger write off is over 6000 lbs. Not that we'll choose a car based on that, but it was interesting to see.

The examples I tried in last year's Turbo Tax, to play with numbers showed an example of:

Purchase price: $25,000

The write off of for under 6000 came to about 12,700 and the write off for over 6000 lbs SUV + came to 17,500 (using 70% in both cases).

If we, for ex... did 17,500 this year as 70% of purchase price for 70% use for biz... is there any further deduction in future years less to account for depreciation since the max allowed IS 70% of the 25k? Or is this a one time thing?  

If we bought something at $30,000 and it still limits this year to 17,500... does the mean the balance gets depreciated (70% or otherwise, of the $5000 left over) in future years (based on the year's actual mileage % of personal vs business)?  

I found out in these notes I read that if we do the large deduction this year, we have to do actuals for life of the SUV. So I'm trying to evaluate what kind of write off would be included, that means in the future (gas, tires, maintenance, insurance etc... at 70% too.) But would there also be a car depreciation left over (especially if we go over 25k and max out at 17,500 this year.)

I did read one example where someone drove a ton of miles a year and I could see where that would not be a wise idea to take a bulk write off at one time. But we probably drive about 5000 biz miles. Not 26,000 in the other example posed in another question on here. 

Lastly... I had one very odd thing happen in calculation. On a separate screen asking for the sales tax on the purchase price to be added (as "property tax portion") I did as an example $1500 and it lowered our tax bit a bit more. However... if I put in $1600 in that same line instead, it actually drastically changed our whole tax situation for the worse. It  added costs back into the federal taxes that surpassed even the $1600 we spent on sales tax. What would have caused that?  

Actual # original tax due was $266 due to federal with 17,500 being written off. But adding 1600 of tax. changed amount due to $2016... a difference of $1750 now due for having entered a $1600 write off? At the same time, the GA state tax refund went up $60. But that's still a net loss of $1690. Can anyone explain why the would happen?

Thanks for any assistance.  So much useful info on here already.

[tagteam]

What is the goal here?

If you take the maximum Section 179 deduction based on your business use percentage or the special depreciation allowance then you are generally done.

Also, the sales tax should be added to your cost basis. Where are you inputting the sales tax in the program?

@Critter-3 

@Mike9241 

[1099erGirl]

I had tried to enter the property tax number as part of vehicle registration fee after the car sale info and that was throwing it off in weird ways. Instead, I suppose the correct way is to enter it as part of the sale of the car instead? Since that section also references sales tax on sale of car. 

So now that I have actual #'s b/c we chose our car today after I asked the question:

I entered our total sales price including tax of $30800. It tells me the max we can include is 12,740 for the write off. Since that's not 70% of 30800 (which is how I entered the expected mileage ratio for rest of the year)... will we be depreciating an additional amount in future years since it's maxing out before 70% of purchase price?  That's my main goal. To understand if in future years we can write off more of this purchase price since we're limited in year 1. 

70% of purchase price / tax would have been = $21,560, not $12,740. The max on an under 6000 lb SUV for the first year is showing $12,740. (At least in the 2021 version of the s/w I'm testing numbers on.) I'll do a new version once we get the s/w for tax year 2022. 

[Mike9241]

since the SUV is under 6K lbs your depreciation is limited by IRC section 280F

for 2021 the maximum depreciation in the first year with 100% business use is $18,200 with 70% business use your deduction is 70% of that or $12,740. 

Turbotax got it right

for more info see IRS PUB 946 page 59

for 2022 the max first year is $19,200 so you'll get an additional $700 deduction with 70% business use

https://www.irs.gov/pub/irs-drop/rp-22-17.pdf 

the link also has the maximum depreciation with 100% business use for future years.

[1099erGirl]

Thanks for explaining how they arrived at 12,740 for ty 2021.

If I land at 70% of 19.200 = 13,440, will I get an amount in year 2 that would account for the rest of 70% of that original purchase price of 30807?

Ex...  2nd year limit on chart you shared is  18,000...But since car wasn't expensive enough... would it possibly calculate out at approx 8124?

I arrived at this looking at 70% of 30800 = 21,564...

8124 is the rest of 70% not written off in year one or is year one it for me? Or do they divide that out over 5 years. 

I don't know of course if 70% will be the same every year but I assume they'll calculate based on actual miles for biz vs personal for each year and I have to remain above 50% which won't be a problem. 

Thanks so much for the help understanding this. 

Do you happen to know a website where it lists the adjusted amounts by state? TT says Georgia isn't fully in line with federal numbers. Sometimes in the s/w it would be very specific and say in 2021 I could take 7140 instead of 12,740. But other times it said GA isn't up to date and what # do I want to put in without showing me an actual suggested I'm allowed to include letting me manually enter the number. (I had been testing various car prices at the time, redoing a car entry to see how it would affect my tax due before our actual purchase to see what we could save ). It was weird it wasn't consistent in telling me what # I could use for GA instead of the 12,740.

[1099erGirl]

I've tried posting this before and it seems to keep disappearing...

Thanks for explaining how they arrived at 12,740 for ty 2021.

If I land at 70% of 19.200 = 13,440, will I get an amount in year 2 that would account for the rest of 70% of that original purchase price of 30807?

Ex...  2nd year limit on chart you shared is  18,000...But since car wasn't expensive enough... would it possibly calculate out at approx 8124?

I arrived at this looking at 70% of 30800 = 21,564...

8124 is the rest of 70% not written off in year one or is year one it for me? Or do they divide that out over 5 years. 

I don't know of course if 70% will be the same every year but I assume they'll calculate based on actual miles for biz vs personal for each year and I have to remain above 50% which won't be a problem. 

Thanks so much for the help understanding this. 

And do you have a resource I can check for how much GA lets me count? One test on the software showed me the limit of 7140 but another time on another test of a different car price, it told me GA is limited without telling me how much I should enter to include. I'm not sure why it acted differently between the two tests. I'd rather TT calculate what's allowable.