I purchased a Ford F150 in 2017 for approx. 80% use for my biz. Price was 48k but used a personal vehicle for trade in and also put cash down payment. Purchase price for new vehicle is 48k......personal trade 16k.....down payment 9k. Financed amount is 23k plus TTT. How do I apply this to 179?
The cost for the Section 179 deduction is 48,000. Interest on the loan is a business expense. How you record the trade in value as contributed capital to the business depends on the type of business it is.
There are limits on the Section 179 Deduction for vehicles. The chart below from
shows that the maximum is 11,160. Since you reported that it is 80% business use, the Section 179 deduction is reduced to 8,928.
In addition to the Section 179 deduction, you might be eligible for "Bonus Depreciation", which is up to 50% of the asset cost. Bonus Depreciation is taken after the section 179 Deduction and before the yearly amount.
One does not cancel the other out.
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.
make sure to put the cash into the S-Corp so it is the entity that purchases the vehicle. this keeps it clean so should the IRS look at the transaction it is clean. You could have problems with the IRS if the title were issued in your name rather than the business.
if I were doing bookkeeping for the Corp I would debit Vehicle and credit Additional Paid-in Capital for $12,500. it is listed on the new vehicle invoice as a trade-in. then you write a check from the Corp to the dealer for the net balance. Debit Vehicle and Credit Cash.
the value of the vehicle is now the full purchase price (obviously net of incentives) and that's what you depreciate.
the dealer should be able to handle this even though the title of the old vehicle is your name not the corp
as an aside rather than 179 see if bonus depreciation produces the same effect. the are some annoying issues with 179 depreciation.
as another aside unless you are familiar with the ins and outs of having an S-Corp I would strongly recommend you use a tax pro for the first-year return. And don't forget your salary.
I’ve been trying for months to get a cpa to help me. They are awful near me. Never call me back. Meet with them. They never follow thru. I call back over and over riding them to give me answers on this van purchase and get no solid info. Very frustrating.
Anyways, yes the Van will for sure be in the business name. As for the trade-in money, I won’t ever see that in my hands. They are taking the trade and immediately applying they value to the invoice. I asked for $2500 of that $12,500 value in a check back to me the rest gets applied directly to van so that money will never get deposited into my business account, so I wouldn’t be writing a business check back for the trade value.
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